Overview of the Statewide Fiscal Profile of New York State School Districts

This report is the nineteenth edition of a report produced by the State Education Department depicting five-year trend data on school district expenditures and revenues. Major financial trends during the 2001-2002 to 2005-2006 time period are discussed at the statewide level.

Changing Trends

Fiscal trends in school district revenues and expenditures constantly change. For example, the fiscal profiles began during a period of fiscal prosperity for the State. Throughout much of the 1980s, the State was able to provide substantial increases in aid to school districts. Between 1982-83 and 1988-89, State aid increased by approximately $3.5 billion (an average yearly increase of $576 million).

These trends dramatically changed in the late 1980’s and early 1990’s. The fiscal health of the State declined and a series of fiscal year deficits occurred, which substantially impacted the distribution of State Aid. Between 1991-92 and 1994-95, State aid increased by only $82 million. The $27.3 million average yearly increase in State aid for this period was noticeably lower than the $576 million average yearly increase in the mid to late 1980’s.

However, as the State’s finances improved, revenues from the State aid increases became larger. Between 2001-2002 and 2005-06, revenues from State sources increased by about $2.7 billion. These years witnessed an increase in State Aid (approximately $2 billion) and the growth of the School Tax Relief Program (STAR), which in 2005-06 provided over $3.2 billion in State revenues to school districts to help reduce the property taxes of homeowners.

Patterns in school district enrollments also changed. A long decline in K-12 enrollment in upstate urban districts expanded into suburban and especially rural districts. New York City has experienced a small but noticable drop in enrollment in recent years. As a group, only the downstate, suburban districts have generally enjoyed growing student populations.

Changing pupil counts can dampen or inflate the effect of aid increases on individual students. The effects of inflation and enrollment growth can perhaps be best understood with a few examples. The $8.1 billion (25.6 percent) increase in total expenditures between 1999-2000 and 2003-04 translated into an increase of $2,786 (25.2 percent) per pupil. However, after adjusting for inflation, 2003-04 expenditures were worth $12,578 per pupil in 1999-2000 dollars. In short, after adjusting for inflation the statewide average expenditure per pupil was $1,538 more (13.9 percent) in 2003-04 than it had been in 1999-2000. Thus, a 25.6 percent increase in the total expenditures after adjusting for inflation represented a per pupil increase about half that size.

The fiscal profile reporting system was designed to answer questions of interest to policymakers. For this reason, profile data are presented so that comparisons can be made for a five-year period.

Use of Fiscal Profile Data

Fiscal Profile data are used in a variety of ways. Some of the ways include:

· To provide data to State agencies, members of the Legislature and their staff, school districts, educational interest groups, the press and the public;

· To assist in the development of the Regents State Aid Proposal;

· To serve as the source of fiscal data reported in New York the State of Learning: A report to the Governor and the Legislature on the Educational Status of the State’s Schools;

· To serve as a source of expenditure data for the School Report Card;

· To serve as the data source for the calculation of the cost of general education per pupil and special education per pupil;

· To assess the spending and revenue trends of districts; and,

· To suggest further analyses needed to better understand the spending and revenue trends of a particular district or group of districts.

Brief Description of the Fiscal Profile Tables

The tables displayed in this report are based on school districts as they existed for the 2005-06 school year. Thus, any districts that combined (e.g., consolidation, merger, annexation) between July 1, 2001 and July 1, 2005 are treated as a single district for the entire time period.

The Fiscal Profile tables allow school district data to be analyzed from a variety of perspectives. Tables 1, 2, and 3 provide alternative methods of examining revenues by source and expenditures by selected categories. The row titles and columns of the tables are defined and explained in the Appendix.

Table 1 displays the total dollars associated with the revenue sources and expenditure categories. Table 2 displays each revenue source and expenditure category in terms of dollars per pupil. Table 3 displays each revenue source and expenditure category in terms of total revenues or total expenditures for the first and last years of the reporting period. Table 4 describes important State Aid, district and instructional program characteristics.

The pupil count used throughout the report is called duplicated combined adjusted average daily membership (DCAADM). This pupil count consists of: pre-kindergarten pupils (weighted at .5), the average daily membership of a district (1/2 day kindergarten pupils weighted at .5), pupils attending BOCES, pupils for which the district pays tuition to another district, pupils in approved private placements, pupils attending the State schools at Rome or Batavia, residents of the district attending charter schools and incarcerated youth for districts responsible for providing the program.

Tables 1, 2, and 3 are based on data from the Annual Financial Report (Form ST-3, hereafter referred to as the ST-3). The ST-3 is an unaudited document, which displays a district’s reported expenditures and revenues. It does not necessarily reflect changes that have occurred after the initial review process. It is important to note that the ST-3 is a document designed to provide fiscal accountability; it is not an educational program document. Although the State’s intent with the ST-3 is for school districts to provide a uniform statement of revenues and expenditures, the possibility exists that school districts will interpret the instructions and account codes differently.

In some districts, particularly high-need districts, an important element of the educational program is the Special Aid Fund. Originally, the Special Aid Fund was used to account for educational projects supported by the Federal government. Today, the Special Aid Fund includes revenues from all sources and expenditures to support State and Federal categorical programs.

Table 4 provides data on district wealth, the unreserved fund balance, local effort and the instructional expenditures of school districts.

Presentation of the Findings

The data(1) are described in terms of statewide trends. It should be noted that statewide trends may be quite different from district trends or trends at aggregation levels other than the State. Any reference to inflation-adjusted dollars or constant dollars is based on the methodology described in the Appendix.

Section II: Major Trends 2001-2002 To 2005-2006

General Revenue and Expenditure Trends

Grand Total Revenues

Total revenues for the period increased by 25.4 percent (22.7 percent after adjusting for inflation), reaching a total of $46.2 billion in 2005-2006. Total revenues per pupil increased from $12158 to $16,354 or 34.5 percent. After adjusting for inflation, 2005-2006 revenues per pupil represented $14,644 per pupil in constant dollars, an increase of $2,486 from the 2001-2002 school year.

Figure 1(2) displays the dollar change for each of the revenue sources and for total revenue between the 2001-2002 and 2005-2006 school years. The figure shows that the total revenue of school districts increased by $11.1 billion and revenue from Local sources increased by $7.3 billion or 65.9 percent of the total.

The State sources increase can be viewed as having two distinct components. The first component consists of revenue traditionally provided by the State, which increased by $2.0 billion. The second component consisted of School Tax Relief (STAR) payments from the State to school districts for exemptions provided homeowners(3) and provided $3.2 billion(4) in revenue to school districts in 2005-06, an increase of $700 million in this time period.

Revenue from local sources increased by $7.3 billion (45.1 percent) between 2001-2002 and 2005-2006.  Revenue from Federal sources represented a growing portion of the increase in total revenues, although Federal revenue remains a small fraction of total revenues. Out of a total increase in revenue of $8.9 billion, revenue from Federal sources accounted for $1.1 billion (about 12.9 percent) of the increase. Revenues from State sources traditionally constitute approximately two-fifths of the total revenues of school districts.

Figure 2 shows that the “State share” of total revenues decreased 5.9 percentage points during the period, while the local share increased. The Federal share increased 1.1 percentage points, reaching 6.1% of total revenues in 2005-2006.

Revenues: State Sources

During this period, revenues from State sources increased by $2.7 billion or 16.0 percent. STAR was responsible for 25.9 percent of the increase in revenues from State sources.

Revenues: Local Revenues

Statewide, revenues raised locally increased by $7.3 billion and accounted for 65.9 percent of the increase in total revenues.  On a per pupil basis, local revenues increased from $5,619 to $8,331, a change of $2,712.  After adjusting for inflation, the change in local revenues per pupil for the period was an increase of $1,841.

The local revenue picture was complicated by several developments during this time period. A major purpose of the STAR program is local tax relief; STAR is successful if the raising of school district local revenue is restrained. Conversely, New York City substantially increased local revenues for education during most of this period.

Revenues:  Federal Sources

Statewide, revenues from Federal sources increased by 60.3 percent (54.0 percent after adjusting for inflation). However, this impressive percentage increase represents just over $1 billion. Figure 1 (above) shows that the Federal increase in revenue was noticeably lower than the State’s increase in dollars.  On a per pupil basis, revenues from Federal sources increased from $612 to $1,002 (63.8 percent).  After adjusting for inflation, the per pupil increase was $285.

Unreserved Fund Balance

The unreserved fund balance (General Fund) consists of the funds appropriated for the following year’s budget, the unappropriated fund balance, and investments frozen by a bankruptcy court. When the Big Five Cities (Buffalo, Rochester, New York, Syracuse and Yonkers) are excluded, the unreserved fund balances of districts increased by about $300.0 million or 28.6 percent. The majority of the increase in the unreserved fund balance occurred in 2002-03 and 2003-04, as districts reacted to large increases in retirement systems obligations.

Total Expenditures

The pattern in total expenditures was similar to the patterns discussed for revenues. Statewide, total expenditures increased by $10.4 billion or 29.4 percent. After adjusting for inflation the increase was 26.3 percent. On a per pupil basis, total expenditures increased by 32.2 percent (from $12,265 to $16,212). After adjusting for inflation, total expenditures per pupil increased by $2,253 for the period.

Specific Expenditures

Instructional Expenditures

Teacher Salaries

The single most important component of the statewide increase in total expenditures was teacher salaries. In 2005-06, expenditures for teacher salaries were approximately 35.3 percent of all expenditures by school districts. During the period, expenditures for teacher salaries increased 17.7 percent (15.9 percent after adjusting for inflation). On a per pupil basis, expenditures for teacher salaries increased by 20.3 percent.

PPS Instructional Salaries

PPS instructional salaries increased by approximately $65.2 million or 12.7 percent during the period.This category of expenditure has grown at a relatively modest rate for some time.

Curriculum Development/Supervision

Curriculum development/supervision instructional salaries increased by 16.0 percent (14.3 percent after adjusting for inflation) during the period.  On a per pupil basis, expenditures increased by $59 or 18.4 percent.

BOCES Instructional Expenditures

BOCES instructional expenditures increased 18.3 percent (16.4 percent after adjusting for inflation) during the period.  On a per pupil basis, expenditures increased by $107 or 20.9 percent.

Tuition

Although two distinct tuition categories are displayed in the tables, for the purpose of this analysis, tuition expenditures for the two categories will be combined. Tuition expenditures increased by 47.0 percent (42.1 percent after adjusting for inflation) during the period. On a per pupil basis, expenditures increased by $284 or 50.1 percent.

Other Instructional Salaries

Other instructional salaries increased by 7.5 percent (6.7 percent after adjusting for inflation) during the period. This area experienced the least growth among all categories of instruction.

Other Instructional Expenditures

Other instructional expenditures increased by 35.0 percent (31.4 percent after adjusting for inflation). On a per pupil basis, expenditures increased by $292 ($180 after adjusting for inflation). Other Instructional Expenditures include instructional technology and payments to charter schools, both areas of substantial growth during this period.

Employee Benefits

Expenditures for employee (fringe) benefits are an important component of school district expenditures. The total increase in employee benefit expenditures was more than $3.6 billion; this figure represents 35.2% of the increase in total expenditures. Each of the three categories of benefits grew substantially; retirement benefits grew at the highest rate.

Employee Benefits: Teacher Retirement

One of the major developments during this period was the increase in teacher retirement expenditures of $1.5 billion, or 268.3 percent. On a per pupil basis, expenditures for teacher retirement grew 275.9 percent. The increase in expenditures was due, at least in part, to changes in accounting practices. Projections by the New York State Comptroller indicate that these expenditures will remain high for several years.

Employee Benefits: Health

Statewide, expenditures for health insurance increased by 50.8 percent (45.5 percent after adjusting for inflation). On a per pupil basis, expenditures for health insurance increased by 54.1 percent. Health insurance expenditures continue to be one of the fastest growing categories of expenditures.

Employee Benefits: Other Employee Benefits

The category “Other Employee Benefits” covers a wide range of items, including benefits mandated by law such as unemployment insurance and worker’s compensation. While the cost of these benefits did not rise as quickly as retirement and health benefits did, they did rise by $860 million, or 36.4 percent during this period.

Debt Service

Expenditures for debt service (principal) increased by 61.4 percent (55.0 percent after adjusting for inflation). Expenditures for debt service (interest) increased by 82.8 percent (74.1 percent after adjusting for inflation).State aid policies encouraged building programs during this period.

Wealth Measures

Actual Value per Total Wealth Pupil Unit

The property value per pupil displayed in Table 4 consists of the Actual Value (AV) Per Total Wealth Pupil Unit (TWPU) used in various aid formulas. During the period, the State average AV/TWPU increased from $247,500 to $346,400 or 39.9 percent.

Change in property value per pupil does not occur evenly across the State. The growth in property value was particularly concentrated in the New York City/Long Island/Westchester area. It should be noted that a decrease in property value per pupil could also occur if the growth in pupils is greater (on a percentage basis) than the increase in property value.

Income per Total Wealth Pupil Unit

The income per pupil displayed in Table 4 consists of the Adjusted Gross Income (AGI) Per Total Wealth Pupil Unit (TWPU) used in various aid formulas. During the period, the State average income/TWPU increased from $102,100 to $118,500.

Local Effort Rate

The local effort rate is similar to but different from the property tax; the local effort rate calculation includes all sources of local revenue. The State average local effort rate increased statewide by $1.65 (from $16.59 per thousand to $18.24 per thousand) 2001-02 to 2005-06. As noted earlier, a major purpose of the STAR program is to replace local dollars with state dollars.

Expenditures for Providing Instructional Services

This report has traditionally calculated instructional costs according to three definitions. The definitions differ because of limitations with ST-3 or differences in how instruction can be defined.

Instructional Expenditures (Excluding Employee Benefits)

One way to define instructional expenditures is to sum ST-3 account codes clearly associated with the provision of instructional services. Such a definition, however, excludes employee (fringe) benefits paid from the General Fund. The General Fund account codes for employee benefits are single line entries that do not distinguish between the instructional program and other programs. Since employee benefits paid for out of the General Fund would have to be excluded from the definition of instruction under this approach, employee benefits paid from another fund (which can be identified) were excluded from this definition of instruction.

For this report, instructional expenditures (excluding employee benefits) were defined as the sum of the following Table 1 categories: Teacher Salary; PPS Instructional Salaries; Curriculum Development/Supervision; BOCES Instructional Expense; Tuition 1 and 2; Other Instructional Salaries and Other Instructional Expenditures. Total expenditures are defined as the total expenditures displayed in Table 1.

Statewide, instructional expenditures (excluding employee benefits) decreased as a percent of total expenditure between 2001-02 and 2005-06. The decrease is a direct result of the increasing cost of fringe benefits.

Instructional Expenditures (Including Employee Benefits)

The exclusion of employee benefits can be criticized for understating the true cost of providing instructional services. A methodology has been developed to estimate employee benefit expenditures associated with the instructional program (see Appendix). The estimated expenditures for fringe benefits for individuals associated with the instructional program was then added to the instructional expenditures previously calculated. In determining the percent that this definition of instructional expenditures was of total expenditures, total expenditures were defined as the total expenditures displayed in Table 1.

After accounting for employee benefits, in 2005-06 such instructional expenditures were $35.2 billion out of total expenditures of $45.8 billion (76.9 percent). Thus, more than three out of every four dollars spent by school districts is used to provide the instructional program.

Instructional Expense

Regulations of the Commissioner have been developed which define instructional expense and provide for an adjustment to total expenditures. For this report, instructional expense can be defined as instructional expenditures (including employee benefits) minus the expenditures displayed in Table 1 for Tuition 1. The regulatory definition of adjusted expenditures excludes expenditures for tuition to other school districts (excluding special act districts); transportation; debt service; and transfers to the Capitol Fund. This definition of expenditures provides a more stable definition of expenditures than does total expenditures since major increases or decreases attributable to one-time building projects or capital spending are not included. In 2005-06, instructional expense was $34.7 billion out of total adjusted expenditures of $39.8 billion (87.1 percent).

Thus, the overwhelming majority of the expenditures of school districts are for providing instructional program. When fringe benefits are included in the definition of instructional expenditures approximately three out of every four dollars spent by school districts is spent on the instructional program. Furthermore, when building and transportation expenditures are removed from the calculation, the instructional program accounts for more than four out of every five dollars spent by school districts.

Section III: Statistical Tables

Statistical tables are provided for all major districts and for Statewide totals. The minor districts (districts with less than eight teachers) and special act districts are excluded.