Testimony of New York City Comptroller Brad Lander to the Joint Hearing of the New York City Council...

Testimony of New York City Comptroller Brad Lander to the Joint Hearing of the New York City Council Committees on Education and Oversight & Investigations on DOE School Budgets for FY 2023

Good afternoon Chair Joseph, Chair Brewer, members of the City Council Education and Oversight and Investigations Committees. Thank you for the opportunity to testify before you today on school budgets for FY 2023.

I'm going to address several key questions: What is being cut from school budgets? What is the status of remaining federal stimulus funding that could be used to fill the gaps on a short-term basis? How should we think about the budget for the long-term, in light of enrollment decline and the end of stimulus funding? What additional information and transparency do we need from DOE to answer those questions?

It's no secret that the past three school years have been among the most difficult, and that our schools are facing an array of overlapping challenges. The pandemic exacerbated pre-existing problems, including inequality and segregation, staff retention, questions about curriculum and outcomes, safety and community-building, and enrollment decline. We need to find a way to face up to those long-term challenges, while not undermining the tremendous work that our individual school communities find a way to do every day.

As our city emerges from the trauma of the pandemic, our schools desperately need the resources to provide our students with every available tool to help them recover and grow. This includes dedicated, talented, well-trained teachers, administrators, guidance counselors, social workers, and the paraprofessionals we are fortunate to have here in NYC, as well as programming in arts and science, ample time for recess, small class sizes, mental health resources and the many other essential supports that make our schools the engaging, nurturing, learning, healing spaces we know they can be.

These resources require funding-and that was the purpose of $7 billion in federal COVID recovery dollars dedicated to K-12 education received by DOE, to be spent over the four years of FY21 through FY24.

What is being cut from school budgets?

In the Preliminary Budget in February, the Administration projected that there would be a net reduction of $215 million from individual school budgets, based on declining and shifting enrollment. To be more precise, they indicated that the application of the Fair Student Funding formula would otherwise result in net reductions of $375 million, but they would offset that reduction with $160 million in register relief. In addition, the Preliminary Budget indicated that $83 million of that $215 million was supposed to come out of fringe benefits-not directly from school budgets. That would have left a cut of $132 million directly to schools.

However, our analysis of individual school budgets made available by the DOE this month shows far greater cuts. Calculating the net decline in just Fair Student Funding, we now see in school budgets a net reduction of $372 million-nearly 3 times the $132 million in cuts in the February forecast.

This is a net number, however, and therefore does not fully reflect the cuts to individual schools. FSF was originally imagined as a way to shift resources between schools, so that if one school grows and another shrinks, the money follows. And that still happens to some extent. Based on enrollment increases, the DOE has provided FSF increases to 354 schools (approximately 23% of schools).

However, with broader enrollment decline, FSF has primarily become a formula for cutting resources to schools. Many more schools, 1,166 schools across the city (approximately 77%), are receiving cuts from their FY22 to FY23 budgets, for total cuts to individual school budgets, based on the FSF calculations, of $469 million.

That's an average FSF cut of $402,456, which on average is 8% of individual school budgets. Roughly 450 schools have cuts exceeding 10% of their budgets. Dozens of schools are seeing cuts of over $1 million. This type of dramatic decrease is not something individual schools can absorb in one year without drastically impacting the essential services and supports students receive.

Like many of you, as I've been attending school graduations across the city, I've been asking principals how big their cuts are, and what they are planning to do, and the answers are devastating. Principals are being forced to excess teachers-often teachers that they have hired in recent years, and who are bringing great new energy and talent -eliminating art or music classes, and/or reducing the number of sections for particular grades, leading to an increase in class sizes.

In one case, a principal told me they've established a new lab program for young learners that has been attracting attention to the school from across their district, and which they believe was going to help boost enrollment. However, because that teacher is a more recent hire, she will be forced to excess her, and the program will be lost. This morning I talked to a principal who is losing three teachers, including the last of five art teachers that her middle schoolers have lost in recent years.

Two more notes here:

First, it is true, as the Mayor has indicated, that City tax levy funding for the Department of Education operating budget increased this upcoming year, by $849 million or 6%, similar to increases at other City agencies. Costs rise from year-to-year-this year we're especially seeing huge increases in fuel and heating, for example-and fortunately this year we had increasing tax revenues to cover those expenditures.

Second, the FSF reductions are just a piece of the estimated $1.7 billion in Galaxy school budget losses facing our schools. Unfortunately, given limited transparency on what those overall budget losses represent, we cannot fully assess what that $1.7 billion means for our schools. We suspect that most of this is one-time stimulus allocations, which school were told would not be recurring. However, it may include other funding streams such as Title 1.

Still, the basic fact relevant for today's hearing is this: 1,166 schools are receiving cuts to their core FY23 budgets, for an average of $402,456, adding up to a total of $469 million.

What do we know about the status of stimulus funding?

To help school systems across the country deal with pandemic revenue declines, cost increases for PPE, ventilation, and remote learning, and to address the daunting social, emotional and academic supports, the federal government provided stimulus funding to school districts. The New York City Department of Education is receiving $7 billion.

As best as we can tell based on available data so far, the DOE has spent $2.3 billion of that funding, a number that could rise to $2.7 billion once accruals through June 30thare calculated. That leaves $4.3 billion in federal stimulus funding left to spend over the next three fiscal years.

To break this down a bit more, we spent about $300 million in FY21. For FY22, DOE budgeted $3.018 billion. As of June 20, 2022, my office estimates that DOE had $2.03 billion in stimulus funding liquidations, and $2.34 billion in committed stimulus dollars. As the end of the school year and fiscal year rapidly approach, we expect that commitments to edge up a bit more, to approximately $2.4 billion.

That would mean about $620 million that was budgeted but not spent in FY22 will be rolled forward to future years-more than enough to cover the cuts to school budgets for next fall. And it would still leave a total of $3.7 billion remaining to spend over the next three years. DOE has indicated that it is planning to spend $1.8 billion in FY23, and $1.4 billion in FY24 and $530 million in FY25.

To be clear, those funds are already budgeted for a wide range of important programs, including Summer Rising, 3K expansion, academic recovery, support for students with IEPs, gifted and talented programs, etc. And much of it will go to schools.

But let's be clear: these are policy choices. The DOE is currently choosing to cut the average school budget for the 1,166 schools projected to lose enrollment by an average of $402,456, while applying the remaining one-time federal funding to these other uses.

I believe that, at this moment, with our schools still reeling from the pandemic, that is the wrong choice. I urge the mayor to apply the rollover of stimulus dollars unspent in FY22 to hold core funding steady for schools for next fall. If we assume $620 million in unspent funds will be rolled forward, then offsetting the full cut of $469 million would require only 20% of the potential $2.4 billion in federal stimulus funding available for FY23.

How should we think about the budget for the long-term, in light of enrollment declines and the end of stimulus funding?

The Mayor and the Chancellor are correct that we do need to address the long-term trend of enrollment decline, that federal Covid stimulus will not continue, and that we cannot make schools dependent on a funding stream that will disappear after FY24. We do face sizable out-year budget gaps, and the possibility of an economic downturn.

But the right way to do that is through a public conversation, informed by data and values. And it would be far better to do while our individual schools are not reeling from steep cuts. The federal stimulus funding could buy us the opportunity to do it this way.

First, DOE should reevaluate and make transparent 2022-23 enrollment projections, to ensure that steep declines during the pandemic are not automatically assumed to be the trendline for current or future FSF allocations. Yes, declines in enrollment predate Covid, but DOE should ensure that its algorithm accounts for one-off fluctuations and provides principals with greater funding stability year to year. Restoring funding now would allow us to see what enrollment looks like in the fall and make more thoughtful long-term decisions with additional information.

This long-term planning must include a re-evaluation of the FSF formula. A per pupil spending model has many benefits, but the FSF formula must be updated to ensure equitable funding for schools that serve our most vulnerable populations of students. Given the projected slow decline in enrollment across DOE, we must come up with a better long term funding strategy than repeated cycles of firing teachers and increasing class sizes. And yearly adjustments to the formula that impact school budgets must be publicly accessible and understandable.

It is also important to remember that, while enrollment has been declining, the City tax revenue and State aid that provide the vast majority of school funding is not based on the number of students. So reductions in enrollment could be an opportunity-with the funding and space we already have- for reductions in class size that we've long desired.

What additional information and transparency do we need from DOE to answer those questions?

Finally, we need additional information and greater budget transparency, something that I praise the City Council for prioritizing this year.

While individual school budgets are available, those numbers are not aggregated and tied to the broader DOE budget. Due to problems with the website, for example, we were not able to access the FY 2023 Initial Allocation Summary by district. And it is not possible based on currently available information to assess the relationship between unspent accruals in individual schools with the broader DOE budget.

We need an updated stimulus spending plan, but we also need more real-time transparency on stimulus spending, so that we can evaluate together the choices we are making.

If the DOE's plans for future stimulus allocations will fill some of the current holes in school budgets, let principals know that now. Are there unspent accruals from past years that can be used to support schools? And are the losses schools are facing matched by concomitant cuts at DOE Central? These are not just questions being asked by me-they are being asked by families and educators throughout the city-we need greater transparency now.

In my budget oversight capacity, I will continue to track DOE spending leading up to school reopening this fall and throughout the school year. I am grateful to Chair Joseph and Chair Brewer for recognizing the urgency of holding this hearing today. Right now is the time when principals are making critical staffing and programmatic decisions. Sending schools additional money in the fall will be too late for many essential programs.

Making cuts to individual school budgets at this moment is wrong for our students, for our teachers, and stands in the way of the equitable recovery our city needs. Our schools have endured the hardest two years and need every penny to provide the social, emotional, and academic supports that all our students deserve this summer and fall. Using a modest portion of the unspent federal stimulus funding to cover these costs is the right thing to do. Over the next year, we can address enrollment declines and revisit the Fair Student Funding formula. But we should not be forcing schools to implement sharp cuts to their budgets this summer.

Thank you again for this opportunity to participate in this important discussion.

###

Public link

Please use the above public link if you want to share this noodl on another website.