Distilling Rhetoric & Research on NY State Education Spending

Posted on April 6, 2011



This is another one of those mundane school finance formula posts. This one is focused on media and political spin in New York State around the recently adopted state budget and proposed school aid cuts.

Yesterday, I had the displeasure of reading a New York Post piece in which New York Governor Cuomo and the Post were validating how and why the proposed budget cuts would not and should not compromise the quality of New York State public schools. But this article – both the Post explanations and especially the Governor’s spokespersons explanations present a massive distortion of how the proposed cuts actually affect different types of districts across New York State.

Let’s break it down:

Political Spin

Here’s the public appeal, political spin on why cutting state aid to schools in New York really causes no harm:

The state’s student population dropped to 2.7 million from 2.8 million — or 4.6 percent — during that period.

And during that same span, the number of rank-and-file teachers grew to 214,000 from 194,957 — a 9.8 percent increase.

As a result, overall public-school expenditures more than doubled, from $26 billion to $58 billion statewide.

And:

“The huge growth in school bureaucracy and overhead is disturbing, especially since many schools are threatening to fire teachers,” Cuomo spokesman Josh Vlasto said. “School districts clearly have more than enough to do more with less.”

Read more: http://www.nypost.com/p/news/local/supervisor_bloat_hikes_overhead_gnbt3xbRu6hnqPRqrCTZvO#ixzz1IkEkATFa

Very simple: New York State school districts have added a whole bunch of administrators they don’t need – administrators who are obscenely high paid, and really just a massive waste. That is, if we accept the numbers reported above. But I won’t go after those in this post, because the argument is flawed on so many other levels. I will say that it is a foolish stretch to argue that administrative bloat has caused a doubling of per pupil spending across New York school districts.

Essentially, the argument here is that since there is so much bloat and waste – REGARDLESS OF WHERE THAT BLOAT AND WASTE EXISTS, if we cut aid to districts, they can simply cut that bloat. Of course that logic doesn’t work so well if the proposal is to cut aid from districts which are not the ones with the reported bloat.

Academic Analysis on Relative Efficiency and State Aid in New York

It is indeed interesting that the NY Post and Governor’s office have chosen to focus on spending increases since 1997.  Spending in many New York school districts, teacher salaries and administrative salaries in many New York school districts did escalate over this period. But why? What’s going on there? In what districts and what parts of the state is spending increasing, and does state aid play any role in those increases? Perhaps most directly on the question above, are some of those increases in spending actually leading to inefficiency, and is there any component of state aid that might be encouraging inefficient spending in school districts? If that was the case, we’d probably want to look first at those state aid programs as a place to cut.

Here are some summaries of findings from studies on New York State’s STAR tax relief program, which provides a sizeable chunk of financial support in systematically larger amounts to affluent communities:

Eom:

We test this hypothesis by examining the introduction of New York State’s large state-subsidized property tax exemption program, which began in 1999. We find evidence that, all else constant, the exemptions have reduced efficiency in districts with larger exemptions, but the effects appear to diminish as taxpayers become accustomed to the exemptions.

http://bk21gspa.snu.ac.kr/datafile/downfile/%EC%97%84%ED%83%9C%ED%98%B8%28GSPA-SD%2907_1.6.8.pdf

Public Budgeting & Finance / Spring 2006

Eom & Killeen:

Similar to many property tax relief programs, New York State’s School Tax Relief (STAR) program has been shown to exacerbate school resource inequities across urban, suburban, and rural schools. STAR’s inherent conflict with the wealth equalization policies of New York State’s school finance system are highlighted in a manner that effectively penalizes large, urban school districts by not adjusting for factors likely to contribute to high property taxation. As a policy solution, this article presents results of a simulation that distributes property tax relief using an econometrically based cost index. The results substantially favor high-need urban and rural school districts.

http://eus.sagepub.com/content/40/1/36.full.pdf+html

Education and Urban Society November 2007

Rockoff:

I examine how a property tax relief program in New York State affected local educational spending. This program, which lowered the marginal cost of school expenditure to homeowners, had statistically and economically significant effects on local government behavior. A typical school district, which received 20% of its revenue through the program in the school year 2001- 2002, raised expenditure by 4.1% and local property taxes by 6.8% in response. I then examine how the preferences of various groups of local taxpayers affect educational spending by identifying systematic variation across districts in the response to fiscal incentives. These results support the hypothesis that homeowners are more influential on local expenditure decisions than renters, owners of second homes, or owners of non-residential property.

http://www0.gsb.columbia.edu/faculty/jrockoff/papers/local_response_draft_january_10.pdf

Recap of the Research

So, let’s recap. What do we know about NY state aid and the potential link to the supposed inefficiencies to which the NY Post article and governor’s spokesman refer:

  1. That STAR aid in particular is allocated disproportionately to more affluent downstate school districts;
  2. That STAR aid, by reducing the price to local homeowners of raising an additional dollar in taxes to their schools, encouraged increased local spending on schools;
  3. That when the relative efficiency of school districts is measured in terms of increases in measured test scores, given additional dollars spent, STAR aid appears to have encouraged less efficient spending. STAR aid enabled affluent suburban districts to spend on other things not directly associated with measured outcomes, but things those communities still desired for their schools.
  4. That STAR aid contributes to inequities across districts in a system that is already highly inequitable.

What’s happening now?

As I have shown here, in recent years, STAR aid continues to be allocated inequitably, benefitting systematically wealthier districts.

https://schoolfinance101.wordpress.com/2011/02/04/where%E2%80%99s-the-pork-mitigating-the-damage-of-state-aid-cuts/

https://schoolfinance101.files.wordpress.com/2011/02/figure3.jpg

Funding inequities persist across New York state districts, with affluent suburban districts far outspending their poorer urban neighbors.

See www.schoolfundingfairness.org

But, the proposed funding cuts are not targeted at the districts which are most likely contributing to “inefficient” spending growth (if it is really inefficient).

The state aid cuts are not targeted to the state aid which seems to be stimulating less efficient spending and exacerbating inequity.

Rather, the proposed state aid cuts fall disproportionately on general foundation formula aid for those districts which have already been left in the dust by their more affluent neighbors. https://schoolfinance101.wordpress.com/2011/02/04/where%E2%80%99s-the-pork-mitigating-the-damage-of-state-aid-cuts/

https://schoolfinance101.files.wordpress.com/2011/02/figure5.jpg

How does that make sense?

Quite honestly, the argument made in the Post, and by the governor’s spokesperson is really obnoxious and misguided, given the distribution of the planned cuts.

Analogy for the day

Let’s say we have a state aid program for personal transportation and we have some really rich communities and some really poor communities.

Let’s assume no mass transportation exists.

Let’s say we (the state) decide to give individuals in the poor communities $200 per month to help them purchase, insure and maintain a personal vehicle –  a freakin’ car… and pretty damn cheap car that is minimally functional and questionably reliable. The $200 per month is pretty much all they’ve got. They’ve got few or no personal resources to contribute to an upgrade, and pretty much live month to month on maintenance and insurance.

We use another pot of aid to give $100 per month to residents of the rich community, who’ve already gone out and purchased Bentleys and Ferraris, and mostly use that money for occasional detailing of their vehicles which they might otherwise forgo (perhaps not) or perhaps an enhanced satellite radio subscription they might not have otherwise chosen and one that includes channels the never really expect to use (typically, they would have gotten the most expensive subscription anyway. As the truly rich like to point out, no-one who’s truly rich would ever dare ask how much it costs to maintain a yacht).

All of the sudden, the state budget is tight and a new report from some think tank comes out showing that in the past 10 years, more and more NY residents are driving Ferraris and Bentleys and more and more of them get their cars detailed on a monthly basis and have the most expensive satellite radio subscription. It’s an abomination. Therefore, cutting aid certainly causes no harm.

So policymakers pass their first on-time budget in years, cutting 10% of that $200 per month that currently supports basic car purchases in the poor communities! They ignore entirely that the $100 per month to the rich communities even exists.

Of course, once we’ve cut that money and ignored the other, what we now have is a set of poor communities that is less able to insure and maintain their economy vehicles. And about those Ferraris and Bentleys? We haven’t even touched their detailing subsidy.

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