State Aid to School Districts in New York State: An Overview Based on the Laws of 2004

1. Attachment C State Aid to School Districtsin New York State:An Overview Based on the Laws of 2004 State Aid Work Group New York State Education Department August 11, 2004

2. School District Types • 657 K-12 school districts and 23 non-K-12 districts employ 8 or more teachers and are eligible for regular State Aid. • All are fiscally independent (with independent taxing and borrowing authority) except the Big Five. • 38 Boards of Cooperative Educational Services (BOCES) provide a range of programs and services to groups of school districts other than the Big Five. • Seven districts with fewer than eight teachers are eligible to receive only Operating and Transportation Aids.

3. Total Revenue from State Sources Total General and Special Aid Fund Expenditures Average Total Expenditure Per Pupil* Average State Revenue Per Pupil* $17.6 billion including STAR $39.0 billion $13,505 $6,098 New York State PK-12 EducationA $39 Billion Enterprise (2003-04 Estimated) *DCAADM

4. Sources of Revenue for EducationNew York State, Major School Districts, 2001-02

5. Where the Education Dollar is GoingNew York State, Major School Districts, 2001-02

6. Local Revenues (2001-02) • Constitute 46 percent of education revenues • About 91 percent derives from property taxes levied by boards of education on residential and commercial properties • Only the Big 5 Cities have constitutional tax limits; limits apply to total municipal budget, of which the school budget is a part • The considerable reliance on local revenues results in large spending disparities among school districts

7. State Revenues for Education • 91 percent of State revenues for education from State General Fund, primarily from income and sales taxes • State sales tax laws reserve 4.25 percent for the State and permit counties and cities to levy up to an additional 4 percent • Approximately 9 percent comes from a special revenue fund account supported by lottery receipts

8. Revenue from State Sources* as a Percent of Total Expenditures for Public Schools • Low: 1944-45 31.5 percent • High: 1968-69 48.1 percent • Current: 2003-04** 45.2 percent *2003-04 includes State revenues for School Tax Relief (STAR): 7.0 percent. ** Estimated.

9. 2004-05 State Aid Programs

10. How Major State AidFormulas Have Traditionally Worked There are primarily two types of formulas: 1. Per Pupil Formulas: Pupil Count x Dollar Amount x District Aid Ratio Used in: Operating, Extraordinary Needs, Operating Standards 2. Expense-based Formulas: Approved Expenses x District Aid Ratio Used in: Transportation, Building, BOCES, Special Education Note: The District Aid Ratio varies with district need. It represents the share the State pays; the balance is provided primarily from local sources.

11. Three Years of Aid by Need Resource Category

12. Traditional Factors That Drive Aid • District Fiscal Capacity • Income per pupil and Actual Value of taxable property per pupil (Formula Operating, Special Education) • Income per pupil (Extraordinary Needs Aid) • Actual Value per pupil (Transportation [one of two options], Building, BOCES) • Pupil Need Factors • Extraordinary Needs Aid uses an Extraordinary Needs Count, a mixture of student poverty, students with limited English, and geographic sparsity • Spending • Formula Operating Aid (very small portion) • Transportation, Building and BOCES • Special Education (public and private) • Pupil Counts • Used extensively in Formula Operating, Extraordinary Needs and Special Education • Used in minor ways in Transportation and Building Aids

13. What Drives 2004-05 Comprehensive Operating Aid? • District Fiscal Capacity, Spending, Pupil Counts • As on file for the 2001-02 Executive Budget proposal for 2000-01 aids (Operating Aid, Tax Aids and Transition Adjustment) • Used to determine eligibility for the 2002-03 one percent increase in COA for low wealth districts (CWR) • As on file for the apportionment of 2002-03 aids (Gifted and Talented Aid, Operating Standards Aid) • Pupil Need Factors • As on file for the 2001-02 Executive Budget proposal for 2001-02 aids • Primarily Based on 2000-01 Aids • Operating Aid, Tax Aids and Transition Adjustment • Operating Aid Adjustment Factors • For 2003-04, a reduction in COA was imposed on all districts with a lesser percent reduction for high need / low fiscal capacity districts • For 2004-05, a 1.75 percent increase is provided for all districts

14. STAR • School Tax Relief Program--enacted in 1997 and took effect with the 1998-99 school year • The State makes payments to school districts to compensate them for reduced property tax receipts • Began with implementing a State funded school property tax exemption for senior citizen homeowners • Planned for a 4-year phase-in, subsequent legislation provided for full implementation for seniors in the first year (1998-99)

15. STAR (continued) • Exemption for owner-occupied primary residences. • Enhanced exemption: $50,000 for an owner (or one of a couple) over 65; annual income cannot exceed $63,750 • Basic exemption: $30,000 for all primary residence homeowners (begun in 1999-00, phased in over 3 years)

16. School Tax Relief by School District Need Categories(2003-04)

17. Highest Need School Districts Tax at a Higher Rate, but Tend to Raise Less and Spend Less

18. State Aid Issues School Year 2005-06 • Students who attend schools with high concentrations of poverty: • Have the farthest to go to meet the State’s learning standards • Are more likely to attend schools with fewer resources • Design a proposal that recognizes these conditions