State Aid to Schools

A Primer

Pursuant to Laws of 2007


The University of the State of New York


Fiscal Analysis and Research Unit

December 2007




            The “Primer” is an annual publication highlighting key school aid concepts, including the impact of this year’s legislation.  With the goal of locating some basic facts in one place, data and tables for this publication have been excerpted from several State Education Department reports or databases. The report is presented in two parts:


Section I

School Finance in New York State


           In New York State, estimated 2005-06 public education funding comes from three sources: approximately six percent from federal sources, 43 percent from State formula aids and grants, and 51 percent from revenues raised locally.   Local property taxes constitute close to 90 percent of local revenues.  The State assumed a significant portion of this local tax burden through the implementation of the School Tax Relief (STAR) program in 1998.  For the 2005-06 fiscal year, STAR is estimated to account for about 17 percent of State revenues, other State aid for the public schools comes primarily from the State General Fund (approximately 71 percent) wherein the major revenue source is State taxes (e.g., income and sales) and the balance (approximately 12 percent) comes from a Special Revenue Fund account supported by lottery receipts.  All net revenues from the State lottery are statutorily earmarked for school aid.  In addition, the General Fund guarantees the level of lottery funds appropriated for education, making up any shortfall in lottery revenues.

            The major source of local revenue for education in all communities is the tax levied by boards of education (or municipal governments for the Big Five city school districts) on residential and commercial properties within the boundaries of each school district.  Only the Big Five cities have constitutional tax limits, which apply to the total municipal budget.  Small city school districts (those with a population of less than 125,000 inhabitants) had their constitutional tax limit repealed in 1985. Small city residents were not permitted to vote on their school budgets until legislation allowing it was passed in 1997.

            The State's sales tax laws reserve four percent for the State and permit localities to levy up to an additional four percent (usually three percent, but more in the case of New York City and certain municipalities).  Eight counties share a portion of their sales tax with school districts, and are legally permitted to share certain other taxes.  The non-property tax revenues derived from distribution of some portion of the local county sales tax are prorated based on the number of public school pupils residing in the county and enrolled in the various school districts partly or wholly located within the county. In 2005-06, $252 million in non-property tax revenues helped support approximately 156 school districts.

            Small city school districts can impose a utility tax; about one quarter of the 57 small city districts do so.  In addition, recent legislation requires that payments in lieu of taxes (PILOTS) be distributed proportionally among the taxing jurisdictions (including school districts) affected by tax exemptions granted by Industrial Development Agencies (IDAs).   New York City imposes a modified local income tax on residents, a business and financial tax, and a tax on commercial rent, revenues from which are raised to support the City’s budget including schools.   The City of Yonkers also imposes an income tax on non-resident commuters.

            The Big Five city school districts’ fiscal dependency means that the school system does not levy taxes, but is dependent upon citywide taxes for support.  State aid for education enters the city treasury, not the school district treasury.  The fiscal dependence of these school districts is fraught with problems related to the level and stability of funding and the effective use of resources.

            In past years, the Board of Regents has recommended fiscal independence for the Big Five city school districts and, alternatively, maintenance of local tax effort in relation to prior spending for city districts in a fiscally dependent status.  Categorical funding programs with prescriptive funding requirements have traditionally been used to ensure funds were spent for specific purposes, although this is a somewhat fragmented approach with a tendency to be administratively burdensome and, over time, numerous adjustments can result in a complex and disjointed aid system.  Legislation enacted in 2007 extended maintenance of effort provisions to the remaining Big Five (Buffalo, Rochester, Syracuse and Yonkers); a maintenance of effort statute already applies to New York City.

Disparities in Fiscal Resources

            Despite New York’s equalizing State aid system, there remain tremendous disparities between New York State school districts in the fiscal resources available to support education.  In 2004-05, operating expense per pupil ranged from $7,100 for the district at the 10th percentile to $13,681 for the district at the 90th percentile, a difference of 93 percent.

            Since about half of school revenues come from local property taxes, it follows that differences in spending are closely associated with disparities in property wealth. Higher expenditures per pupil are associated with higher actual property value per pupil.  In 2004-05, the average actual value of property per pupil among the lowest spending ten percent of districts was $184,799, while the average actual value per pupil among the highest spending ten percent of districts was $1,422,470, a difference of 670 percent.

            Because the highest spending districts are also those with the highest property values, they exert the least tax effort: the following table shows that the average tax rate per $1,000 of actual value for the highest spending, wealthiest districts was only $10.12, yet the average tax revenue per pupil for those districts was $14,348.  The average tax rate in the lowest spending, property-poorest districts was higher at $14.42, but the tax revenue per pupil was only $2,644 per pupil.  Communities that desire a high level of educational services, but do not have a large tax base, must bear a disproportionately heavy tax burden in order to provide those services.  In addition, school districts serving concentrations of children from poverty backgrounds have a greater educational burden to bear, resulting in a greater need to fund programs that provide extra time and help to educate students, thus increasing educational costs.

            The table shows that the wealthiest group of districts received an average of only $1,809 per pupil in State revenue other than STAR, while the poorest districts received $5,277.  However, the STAR program that was intended to reduce the property tax burden on local taxpayers, particularly the elderly, has provided significantly more revenue per pupil to wealthier districts.  The poorest decile received on average $749 per pupil, while those in the tenth decile received tax relief equivalent to $1,297 per pupil.  Further, the heavy reliance on property taxes to support education has created a situation in which, even with State revenue (other than STAR) per pupil exceeding that of the wealthiest group of districts by 192 percent, the poorest group of districts does not begin to approach the overall spending level of the wealthiest districts.

            The disparities in fiscal resources are due primarily to the varying ability and willingness of school districts to generate local property tax revenue.  As in most states, property values of residences and businesses vary dramatically from school district to school district, as do local assessment practices, and the level of education services desired by the community.  In short, a student’s access to educational resources depends in large part on where he or she lives, raising serious concerns about the equity of student opportunities.



Section II

This section includes selected State Aid concepts and facts including:


                   Purposes of State Aid to Schools


               Key Concepts Concerning School Aid



          State Support to Public School Districts




   Low point - 1944-45 - 31.5 percent

  High point – 2001-02 - 48.2 percent 4   

  2006-07 – 44.3 percent (estimated, including STAR)

   88 percent from the General Fund; including STAR, State income and sales taxes

   12 percent from lottery receipts


Numerous programs but Foundation Aid alone accounts for 70 percent.


Legislative History

*     1990 - Payments to the Teachers Retirement System for 1989-90 amortized over 15 years, reducing State Aid by $684 million.

*     1990 - Unprecedented mid-year deficit reduction legislation cut 1990-91 State Aid payments by $190 million.

*      1991-92 - A State budget was adopted more than two months late with $925 million in deficit reductions.

*      1992-93 - Deficit reductions continued for $1,039 million.

*      1993-94 - State Aid reforms were introduced, deficit reductions eliminated and an estimated increase of $330 million provided.

*      1994-95 through 1997-98 - A State budget was adopted several months late each year; with estimated increases of:



*     1998-99 - Legislation was passed in mid-April.  After vetoes, the estimated increase was $967 million.

*     1999-00 - Legislation was passed more than four months late with an estimated increase of $922 million.

*     2000-01 - Legislation was passed in mid-May with an estimated increase of $1.094 billion.

*     2001-02 - Legislation was passed in August to institute a baseline budget and supplemented in October with additional funds, for an estimated total increase of $680 million.

*     2002-03 - Legislation was passed in mid-May with an estimated increase of $420 million.

*  2003-04 - Legislation was passed in May with an estimated decrease of $207 million.

*     2004-05 - Legislation was passed in August with an estimated increase of $740 million.  

*     2005-06 - Legislation was passed in March with an estimated increase of $830 million.

*     2006-07 - Legislation was passed in March with an estimated increase of $1.1 billion.

*     2007-08 - Legislation was passed in March with an estimated increase of $1.7 billion, including major reform of State Aid.






Estimated 2007-08 ($ in millions)


Foundation Aid                                                                                                  $13,640


Building including Reorganization Incentive                                                       1,768


Transportation Aid                                                                                                 1,424


BOCES and Special Services Aids                                                                        758


Special Education Aids                                                                                            638


Universal Pre-Kindergarten Grant                                                                           438


                                                                                   Subtotal:                                      $18,666


Other                                                                                                                          866



General Support for Public Schools (GSPS)*         Total:                             $19,532



*Excludes Prior Year Adjustment Aid of $27 million and Expanding our Children’s Education and Learning (EXCEL) debt service which are funded outside of GSPS.



                               Local Support for

                           Public School Districts




4     652 K-12 districts and 25 non-K-12 districts employ eight or more teachers and are eligible for regular State Aid funding.


4     All are fiscally independent (have independent taxing and borrowing authority) except the school districts in the State's five largest cities, the Big Five.


4     37 Boards of Cooperative Educational Services (BOCES) provide a range of programs and services to groups of school districts other than the Big Five.




4     The principal source of school district revenues.


4     Property tax levies are established after voter approval of school district budgets or school board adoption of a limited "contingency" budget after voter defeat.


4     The Big Five cities include education in their municipal budget.


4     Although STAR does not represent additional funds for education, it provides broader-based State funds for education, reducing the property tax funded portion of educational costs.




4     Only the Big Five city school districts are subject to constitutional tax limits, and the limits apply to the total municipal budget.


4     Small city school districts had their constitutional tax limit repealed in 1985 and first voted on budgets in 1997.





4     The State's sales tax laws reserve four percent for the State and permit localities to levy up to an additional four percent.  A few localities distribute a portion of the local sales tax to school districts.


4     Small city school districts may also impose a utility tax, not to exceed 3 percent.






Total Revenue from State sources (incl. STAR)                            $21.4 billion


            which represents                                                                                   44.3 % of


            Total General and Special Aid

                Fund Expenditures                                                                       $48.3 billion



3Text Box: 15
Text Box: 16
Text Box: 17


                    Components of School Finance

                   A Comparison of School Districts by Property Wealth Per Student













Text Box: 19Text Box: 19

9Text Box: 2010

                                Foundation Aid




            The formula for Operating Aid is not used to pay 2007-08 aid.  Instead, the Laws of 2007 reformed the State’s method of allocating resources to school districts by consolidating some thirty existing aid programs into a new Foundation Aid formula that will distribute funds to school districts based on the cost of providing an adequate education, adjusted to reflect regional costs and concentrations of pupils who need extra time and help in each district.  The Enacted Budget also included a four-year phase-in of Foundation Aid.


District Foundation Aid per Pupil = [Foundation Amount X Pupil Need Index X Regional Cost Index] – Expected Minimum Local Contribution.





Lunch count X .65

Uses a 3-year average Free and Reduced-Price Lunch percent

Census count X .65

Uses 2000 census percent of persons age 5-17 in poverty

Limited English Proficiency count X .50

Uses base year pupils

Sparsity count

Provides a factor for districts with fewer than 25 pupils per square mile



Capital District


Southern Tier


Western New York


Hudson Valley


Long Island/NYC


Finger Lakes


Central New York


Mohawk Valley


North Country





Selected Actual Value/pupil X Tax Factor of .016 X Income/pupil relative to the State average,




(Foundation Amount X PNI X RCI) X (1 – Foundation Aid State Sharing Ratio).



Total Foundation Aid = Selected Foundation Aid X Selected Total Aidable Foundation Pupil Units (TAFPU).  Selected Foundation Aid is the district’s Foundation Aid per pupil, but no less than $500.  TAFPU is described below.


Total Foundation Aid is phased-in over four years.


In 2007-08, Foundation Aid is:


Foundation Aid Base + (0.20 X the greater of:


Total Foundation Aid – Foundation Aid Base,




Foundation Aid Base X 0.1255).








4     Actual Valuation of Taxable Real Property Per Pupil 4     Adjusted Gross Income Per Pupil




4     Actual Value          

                       Actual valuation of all districts divided by resident pupils of New York State to obtain State average AV/pupil.


For 2007-08 Aid:  $426,800


4     Adjusted Gross Income

                        Total adjusted gross personal income of all taxpayers, as reported on New York State income tax returns and including results of the statewide computerized income verification process, divided by resident pupils of State to obtain State average income/pupil.


                                                                                         For 2007-08 Aid:    $136,600




             Foundation Aid State Sharing Ratio





4     Compare District Wealth Measures to State Average

            Wealth Measures


4     Compute:



       District Actual Value/Pupil





        District Income/Pupil




4     Weight Income and Actual Value Equally (50:50):





      Dist AV/Pupil




+ .50


      Dist Inc./Pupil





This is the district's Combined Wealth Ratio (CWR), a measure of district fiscal capacity based on income and actual value.


                                                                                                                   For Example:


            Average Wealth District                   CWR = 1.00                                           1.00


            Below Average Wealth           CWR = Less than 1.00                                    .20


            Above Average Wealth          CWR = Greater than 1.00                              1.60




             Foundation Aid State Sharing Ratio







            Basic Principle: The poorer a district is compared to the State average, the greater the State sharing ratio.




If the district's CWR is:

Then the State sharing ratio

is computed as follows:


.627 or less

1.37 - (1.23 * CWR) with a maximum ratio of .90

Range .599 to .900


.627 - .800

1.00 - (.64 * CWR)

Range .488 to .599


.800 - 1.336

.80 - (.39 * CWR)

Range .279 to .488


Greater than 1.336

.51 - (.173 * CWR) with a minimum ratio of zero

Range 0 to .279

11Text Box: 26


                       Foundation Aid Pupil Count




Basic Principle:    Foundation Aid   =     Aid Per Pupil       x             No. of Pupils

                                                                                   (Ability)                                     (Need)





Average Daily Membership                                                                  Weighting 1.00

(Full Day K-12)





Average Daily Membership                                                                  Weighting   .50

of 1/2 Day Kindergarten





Pupils with Disabilities                                                                          Weighting  1.41





Pupils Declassified from                                                                     Weighting    .50

Special Education





Pupils in Summer School                                                                      Weighting   .12





                         Sum = Total Aidable Foundation Pupil Units (TAFPU)


                            Foundation Aid Base



For 2007-08 Foundation Aid, the Foundation Aid Base (FAB) is the sum of these aids and grants:


Flex Aid

Public Excess Cost Aid (excluding High Cost Aid)

Limited English Proficiency Aid

Sound Basic Education Aid

Enrollment Adjustment Aid

Supplemental Extraordinary Needs Aid

Growth Aid

Operating Reorganization Incentive Aid

High Tax Aid

Tax Limitation Aid

Early Grade Class Size Reduction Grants

Small Cities Aid

Teacher Support Aid

Improving Pupil Performance Grants

Categorical Reading and Math Grants

Magnet School Grants (including additional amounts)

Fort Drum Grants

Tuition Adjustment Aid


These Aids and Grants are also eliminated:


Comprehensive Operating Aid

Formula Operating Aid

Educationally Related Support Services Aid

Extraordinary Needs Aid

Gifted and Talented Aid

Minor Maintenance and Repair Aid

Operating Standards Aid

Summer School Aid

Tax Effort Aid

Tax Equalization Aid

Transition Adjustment Factor

Shared Services Savings Incentive



Description of 2007-08 Formula Aids to School Districts



Unrestricted aid to school districts for school operation and maintenance. It replaces 30 aids and grants.  Based on an adjusted foundation amount less an expected minimum local contribution.  Formula recognizes regional cost, district need factors and fiscal capacity and is phased-in over four years (2007-08 – 2010-11).


Full Day K Conversion

One year unrestricted aid on a current year basis for approved programs in districts that agree to convert to full day kindergarten programs.  Equal to selected foundation aid per pupil.  Planning grants also available (by 2010-11 all high need and low performing districts must offer full day kindergarten programs).


Universal Pre-Kindergarten

Targeted per pupil grant for approved programs.  All districts are eligible but phased-in at 18 to 30 percent for 2007-08. Equalized by use of selected foundation aid per pupil.


Charter School Transitional

Targets aid to the 15 districts most impacted by a concentration of charter schools, either on the district’s enrollment or budget.  Aid is based on a partial reimbursement of the per-pupil operating expense paid by the district to the charter school.


High Tax

Eligible districts receive a flat grant per enrolled pupil.  Eligibility determined by residential levy exceeding a specified percent of adjusted gross income.



Unequalized reimbursement of expenses up to a flat grant per pupil maximum.


Computer Software

Unequalized reimbursement of expenses up to a flat grant per pupil maximum.


Library Materials

Unequalized reimbursement of expenses up to a flat grant per pupil maximum.


Hardware and Technology

Expense-based reimbursement up to an equalized ceiling amount per pupil for computer hardware and educational technology equipment.  Uses the district’s current year building aid ratio which reflects its relative property wealth. Local share not required.



Expense-based aid for districts that are components of BOCES to obtain services.  Equalized by either the district’s tax rate or relative property wealth per pupil.


Special Services—

Computer Administration

Expense-based aid up to a maximum per pupil for computer expenses.  Equalized for district fiscal capacity.  Big 5 Cities and other non-component districts of a BOCES are eligible.


Special Services—

Career Education

Expense-based aid up to a maximum per pupil for career education expenses.  Equalized for district fiscal capacity.  Big 5 Cities and other non-component districts of a BOCES are eligible.


Reorganization Incentive-Operating

Additional unrestricted operating aid for districts that reorganize after July 1, 2007.  Depending on reorganization year, up to an additional 40 percent of 2006-07 formula operating aid is provided (the percent is scaled down after 5 years).


Excess Cost—Public High Cost

Additional wealth equalized, per pupil aid for students with disabilities in public school- or BOCES-run very high cost programs.  Costs exceeding a threshold are reimbursed using an aid ratio based on district property and income wealth.

Supplemental Public Excess Cost Amount

Aid for eligible districts to accommodate changes in the way aid is provided for public excess cost pupils.

Excess Cost--Private

Wealth equalized per pupil aid for students with disabilities that the public school places in private school settings or State-operated schools for the deaf or blind.



Expense-based aid for approved operating expenses for transportation of pupils.  Property wealth equalized with a choice of aid ratios and sparsity adjusted.  Starting in 2005-06, debt service expenses are aided on an assumed amortization schedule.


Summer Transportation

Transportation aid was expanded to cover summer school programs to help students meet higher learning standards.  Districts with approved programs are eligible for aid up to a maximum State total of $5 million.



Expense-based aid for construction and financing of approved building projects.  Choice of property wealth equalized aid ratios back to 1981-82, depending on date of voter approval.  Up to an additional 10 percent incentive was provided for projects approved on or after July 1, 1998.  Allowable construction cost adjusted for regional cost differences starting in 1998.  Starting in 2002-03, debt service expenses are aided on an assumed amortization schedule.


Reorganization Incentive- Building

Similar to Reorganization Incentive-Operating aid, an additional amount of aid (25 or 30 percent depending on year of reorganization) is provided for building projects related to reorganization.  A maximum of 95 percent of approved building expenses can be aided in total by Building and Reorganization Building aid (98 percent for high needs districts for projects approved after 7/1/05).  The district’s selected building aid ratio applies.


Expanding our Children's Education and Learning (EXCEL)

Starting with 2006-07, a total of $2.6 billion is available over multiple years for capital construction.  The maximum allocations are: $1.8 billion for the New York City school district; $400 million for non-NYC high Need/Resource-Capacity districts, based on a flat grant per pupil; and $400 million for average and low Need/Resource-Capacity districts, based on a smaller flat grant per pupil


Supplemental Education Improve-ment Plan

An $8.5 million grant for the Yonkers school district.

Academic Achievement

An $88.89 million grant for the New York City school district.




Estimated data for 2005-06 from "Analysis of School Finances 2004-05.” New York State Education Department. January 2007. p. 7.

“Description of 2006-07 New York State School Aid Programs.”  New York State Division of the Budget.  October 16, 2006. p. 25.

"An Industrial Development Agency is an independent public benefit corporation created through state legislation at the request of one or more sponsoring municipalities…IDAs serve as financing conduits for local government to attract businesses to New York State, retain existing firms and enhance the state's competitive position…All property titled to an IDA is exempt from real property, sales and mortgage taxes, however, an IDA often negotiates payments in lieu of taxes (PILOTS) with the private developers participating in IDA projects." (School Law 1994), New York State School Boards Association, Albany, New York, p. 433).

Local Government Handbook, p. 171.

Approved operating expenditures per weighted pupil are the operating expenditures for the day-to-day operation of the school as defined in Education Law.  Not included are expenditures for building construction, transportation of pupils and some other expenditures.  Money received as Federal aid revenue, proceeds of borrowing and State aid for special

programs are first deducted from total annual expenditures when approved operating expenditures are computed.

“Analysis of School Finances in New York State School Districts: 2004-05.”  New York State Education Department, Albany, New York, January 2007, p. 16.

See table on page 6.

Conclusions relate to Table 10 of the Analysis of School Finances in New York State School Districts 2004-05 (January 2007), The University of the State of New York, The State Education Department, Albany, New York, page 17, which is reproduced on the following page.

This does not include STAR, which tends to be dis-equalizing as it favors higher property wealth districts.