Confronting the abyssConfronting the abyssNew York City Department of Education

Susan OldsExecutive DirectorFinancial Strategies Group

October 21, 2010

MAYORAL CONTROL SINCE 2002

FISCAL YEAR 2011 OPERATING BUDGET = $ 23 BILLIONRevenues: NYC 49%; NYS 37%; FEDERAL 13%; OTHER 1%

DEPARTMENT OF EDUCATION SCHOOLS = 1,582 including 335 opened since 2002

DEPARTMENT OF EDUCATION PUPILS = 1,039,000 including 108,000 SE, 149,000 ELL and 701,000 free and reduced lunch eligible

NON-DEPARTMENT OF EDUCATION PUPILS:CHARTER = 30,308CONTRACT SE = 33,000

NYC BASICSNYC BASICS

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WHERE CAN WE CUT?WHERE CAN WE CUT?

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DOE’s budget has many restrictions when it comes to budget reductions.

Department of Education Budget $22.296 billionLESS FLEXIBLE $11.972Special Education $4.996PENSIONS $2.397DEBT $1.518Transporation(SE & NYS funds) $0.804ENERGY & LEASES $0.442CHARTERS (NYS sets amount) $0.418FOOD - NYS & Federal Funds $0.411SAFETY $0.290English Language Learners (Est.) $0.250PRE-Kindergarten - state grant $0.231NON PUBLIC SCHOOLS/FOSTER CARE $0.215MORE FLEXIBLE $10.32General Education- DOE SCHOOLS $8.605CENTRAL & FIELD $0.753FACILITIES $0.673Transportation - GE ($NYC) $0.222FOOD $ NYC) $0.071

Amounts shown include fringe costs for personnel

Total budget in FY10

NYC BUDGET REDUCTIONS NYC BUDGET REDUCTIONS

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FY08 FY09 FY10 FY11Grand Total Reductions

FY08 Budget Adopted Budget

cumulative % reduction of

FY08 adopted budget

Central & Field $14,719 $76,913 $24,481 $73,798 $189,911 $655,779 28.96%Indirect School Impact $9,500 $76,793 $28,660 $41,330 $156,283 $2,211,896 7.07%Direct School Impact $98,954 $103,644 $405,546 $314,748 $922,892 $7,380,856 12.50%D75 schools $0 $1,869 $1,869 $0 $3,738 $679,218 0.55%Other (Revenue, Fringe) $56,973 $121,386 $115,937 $404,488 $698,784 $6,055,701 11.54%Total $180,146 $380,605 $576,493 $834,364 $1,971,608 $16,983,450 11.61%

CUMULATIVE PEG REDUCTIONS BY PROGRAM: FY08 - FY11 Adoption (millions)

Note: Omits FY11 $52 million NYS cut announced mid-September & $215 million NYC cut announed in late September

DIRECT SCHOOL IMPACT INCLUDES $700 MILLION ARRA FUNDING OFFSET

NYC STRATEGIES TO MITIGATE NYC STRATEGIES TO MITIGATE SCHOOL BUDGET CUTSSCHOOL BUDGET CUTS

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Shift funds between schools to strengthen under-funded schools’ operating capacity in order to sustain budget reductions

Deploy ARRA and Title I funds to equalize reductions across schools

Maximize non-school budget reductions

Apply collective bargaining/ managerial salary reserve to avoid teacher layoffs

School budgeting in the big appleSchool budgeting in the big apple

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PRINCIPAL AUTONOMY

INTERSCHOOL FISCAL EQUITY

SUPPLANTATION ISSUES

SCHOOL CHOICE

MANDATES & LABOR CONSTRAINTS

HIGH NEEDS PUPIL POPULATIONS

REGISTER GROWTH (+ 9,000 FY10)

SCHOOL PORTFOLIO GROWTH

Key Constraints :

PRINCIPAL AUTONOMYPRINCIPAL AUTONOMY

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Principals and their teams have broad discretion over what happens in their schools, including which teachers and assistant principals to hire and retain and which instructional strategies and supports to use.

Staff Selection: The Department eliminated the practice that allowed senior teachers automatically to “bump” more qualified younger teachers from jobs. Teachers displaced from jobs who are not hired to fill a school vacancy are assigned to the Absence Teacher Reserve (ATR), which is supported with central funds. These teachers remain on payroll at full salary and benefits indefinitely.

In FY10 more than 1,600 teachers were in the ATR pool for a total annual cost of more than $110 million.Budget Management:

Approximately 60% of school funds are unrestricted and can be scheduled according to school needs and objectives, in compliance with laws, regulation, union contracts and department policy.

INTERSCHOOL EQUITY INTERSCHOOL EQUITY

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FSF weights fund basic classroom costs plus costs associated with educating the neediest students.

When launched in May 2007, to fully align school budgets to the FSF formula would have required a shift of $200 million from budgets of over-formula schools to budgets of under-formula schools. But, to preserve stability in all schools, a gradual transition over five years was planned to bring all schools to parity with FSF formula.

Year-over-year budget reductions since 2008 have delayed full transition to FSF.

Through FY10, across-the-board budget cuts, plus growth in average teacher salary – which raises the entitlement, put 98% of schools below their FSF entitlement by more than $1 billion and 2% of schools over by $8 million.

FAIR STUDENT FUNDING (FSF)

School Budgets for FY11School Budgets for FY11 FIRST: Shift funds between schools to improve under-

funded schools’ operating capacity in order to sustain budget reductions

THEN: Across the board percentage cut to school budgets

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Basic Financial Operating CapacityBasic financial operating capacity (“operating threshold”) - FSF amount including Special Education, English Language Learners, ,the portfolio weight, less weighting for academic intervention.

Taking into account other unrestricted funding sources and cap of 3% on loss of school funds, we set the minimum threshold for basic operating capacity at 86% .

Percent of Basic Financial Operating Capacity = sum of school’s FSF and other unrestricted funding sources compared to the school’s operating threshold.

Large Inequities Among Schools’ Large Inequities Among Schools’ Financial Operational CapacityFinancial Operational Capacity

• 34% of Elementary Schools (222 of 642 schools)• 10% of Middle Schools (43 of 407)• 12% of High Schools (52 of 445)• 72% (227 of these 317 schools) incur maximum 7.04%

cut

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• <1% of Elementary Schools (4 of 642 schools)• 30% of Middle Schools (109 of 407)• 7% of High Schools (31 of 445)

10% of schools’ (144 schools) FSF plus other unrestricted funds totaled less than 80% needed for basic operations

20% of all schools (317 schools) were above 100% of basic operations

Ensure schools have capacity to Ensure schools have capacity to operate in FY11 and FY12operate in FY11 and FY12

Schools funded at more than 86.1% of operating threshold shifted money to schools below this minimum

• Shifted $112 million of Children First and ARRA Funds between schools

Impact on schools• 1,020 schools shifted funds in the reallocation (581

Elementary, 196 Middle, and 243 High School)

• 442 schools received funds (48 Elementary, 207 Middle, and 187 High Schools)

• 32 schools unaffected (13 Elementary, 4 Middle, and 15 High Schools)

No change in any school’s FY11 Fair Student Funding allocation 11

Pre-Allocation: % of Basic OperationsPre-Allocation: % of Basic Operations

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Supplantation issuesSupplantation issues

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o Prior to ARRA, 81% of schools Title I eligible and 73% receive NYS Contract for Excellence funds

Growth of categorical funds as a percent of school budgets skews inter-school equity and limits flexibility of deploying state and local funds

Vary federal funds to spread budget reductions more equitably (no FSF change)

o ARRA Title Io Reduce Title I school threshold to 40% from 60%o Count reduced lunch pupils

• As a result 180 more schools receive Title I funds supporting over 90,000 additional pupils.

o ARRA Stabilization Funds distributed across schools in order to bring each school's total budget to the same percent cuto Use ARRA Stabilization Funds to help achieve operating threshold re-allocation in FY11

Mandates and Labor constraintsMandates and Labor constraints

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Average yearly growth in SE mandates since FY06 = 9% or $350 million

State Class Size Mandates

Labor Steps – Teacher average salary grows about 2% or $150 million per yearFringe – average growth 6% or $143 million per yearPension – average growth 11% or $240 million per year

LayoffsState law requires layoffs strictly on the basis of seniority

require the elimination of more positions. lay off newer teachers remaining teachers would be shuffled from school to school hard-to-staff schools with high turnover rates and schools that experienced enrollment growth and hired new teachers would suffer the greatest disruption.

The abyss beyondThe abyss beyond

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FISCAL YEAR 2012

Loss of more than $1 billion in ARRA and Edu-jobs funds

Continued increasing costs

Unstable city & state funding

MITIGATION STRATEGIES

Continue focus on operational capacityContinue to devolve funds to school level to unleash school-based innovations that maximize funds while meeting pupil needs Use technology to reinvent learning