Reviewing The Foundation Aid Formula - New York State .

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Reviewing the Foundation AidFormulaState Aid SubcommitteeOctober 17, 2016

Agenda for Discussion Brief Review of Foundation Aid Pre-Foundation AidWhat is the “Phase-in?”ChallengesFormula Post-GEA Aid Priorities Foundation Aid Phase-in SchedulePolicy Priorities Early Learning English Language Learners2

Prior Regents Advocacy In 2004, the Board of Regents first proposed aFoundation Aid formula that “would replace acomplex system of many formulas” in a way that“is much simpler” After years of advocacy, the Legislature andGovernor adopted the formula in 2007,consolidating approximately 30 other aid formulasand categorical programs into one streamlinedformula.3

Pre-Foundation Aid Funding Prior to Foundation Aid, multiple aid categoriesallocated funding to address particular needs: Flex Aid: general operating support, based onexisting formulas prior to 2007Limited English Proficiency Aid: support for Englishlanguage learner (ELL) studentsExtraordinary Needs Aid: support for ELLs and pupilseligible for Free and Reduced Price Lunch (FRPL)4

Summary of 2016-2017 Regents StateAid ProposalFormula/CategoryFoundation AidTotal ProposedIncrease 1,300 millionGap Elimination Adjustment FullRestorationStatutory Expense-based Increases 434 millionTotal Formula Aid 2.1 billionCategorical Investments (includingpre-k, CTE, etc.) 345 million 403 million5

Foundation Aid FormulaFoundationAmount Pupil NeedsRegionalCostLocalContributionFoundation Aid per pupil is determined using the above formula, which is thenmultiplied by an enrollment count with a special education weighting. Foundation Amount: Cost of educating students in successful schools Pupil Needs: FRPL, ELL, census poverty, and sparsity Regional Cost: Variation among professional salaries by Labor ForceRegion. Expected Minimum Local Contribution: An expected, but not required,level of local spending commensurate with district wealth.The above formula creates a “total” aid amount, which is provided over amultiple year period.6

What is the “phase-in?” Total Need: The Foundation Aid formula generates a dollaramount for each district that represents the total need basedon current wealth and demographics. Total Aid: The total need is divided into state aid and a localcontribution. The increase required to reach the total aid levelis multiple billions of dollars, which requires that the stateprovide the increase over a multiyear period. Phase-in: The difference between the “total” aid and the aidthat a district is currently receiving is referred to as the“phase-in amount.” It is the amount of increased aid that isrequired over a multiyear period to reach the “total” aid level.7

Total Foundation Aid fluctuates over time due to demographicchanges and inflationary factors. Since 2007-08, the increase inbase aid has totaled 4B, with 3.6B remaining to be phased-in. 25.0 20.5 20.1 20.1 5.5 5.5 5.3 4.7 4.2 2.4 2.5 2.7 2.9 3.4 4.0 2.4 12.5 12.5 12.5 12.5 12.5 12.5 12.5 -162016-17 4.3 4.3 2.4 2.4 12.5 12.52007-082008-09 18.1 billions 20.5 19.2 20.0 15.0 20.4 19.1 18.5 3.6 4.4 1.1 20.1 3.6 10.0 5.0 0.0Aids Consolidated from 2006Increases to DateRemaining Phase-in8

Phase-in Challenges Since Foundation Aid is a Per Pupil formula, thetotal aid amount is largely driven by the number ofpupils. There are two key challenges facing districts asthe formula is phased-in: Districts with increasing enrollments require morefunds; andDistricts with declining enrollments are technicallyalready “fully phased-in” as a result of having fewerstudents.9

Phase-in Challenges New York State education aid has a long standingtradition of providing a save harmless againstenrollment losses; that is, as a district losesstudents, it may not receive additional operatingaid, but it won’t lose what it already has. With the Property Tax Cap in place, that meansthose same districts will receive minimal or no aidincreases, and will have limited ability to increasetheir local tax levy.10

Ten years after Foundation Aid was enacted, many districts have seentheir enrollments decline, which has reduced the level of “total” aid theywould receive. In some cases, that amount is less than their current aid,leaving them with no additional phase-in remaining.Aid/Pupil in High Need Districts v. Pupil Needs IndexNegative Means Already Phased-in; no more aidPositive means additional phase-in remaining2.0001.900Higher PNI Means More Student NeedsPupil Need Index1.8001.7001.6001.5001.400HN Rural1.3001.20066 DistrictsHN U/S134 Districts1.1001.000- 7,500- 5,500- 3,500- 1,500 500 2,500 4,500 6,500Difference Between Total and Actual Foundation Aid per Pupil11

Ten years after Foundation Aid was enacted, many districts have seentheir enrollments decline, which has reduced the level of “total” aid theywould receive. In some cases, that amount is less than their current aid,leaving them with no additional phase-in remaining.Aid/Pupil in Average Need Districts v. Pupil Needs IndexNegative Means Already Phased-in; no more aidPositive means additional phase-in remaining2.0001.800Higher PNI Means More Student NeedsPupil Need Index1.9001.7001.6001.5001.4001.3001.200138 Districts198 Districts1.1001.000- 7,500- 5,500- 3,500- 1,500 500 2,500 4,500 6,500Difference Between Total and Actual Foundation Aid per Pupil12

Foundation Aid FormulaFoundationAmountPupil NeedsRegionalCostLocalContributionThe above formula creates a “total” aid amount, which is provided over amultiple year period.13

Foundation Amount (“Base Cost”) Education Law §3602(4)(a)(1) : “reflect[s] theaverage per pupil cost of general educationinstruction in successful school districts, asdetermined by a statistical analysis of the costsof general education in successful schooldistricts” SED administrative study every 3 years, mostrecently in 2015 Annually adjusts for inflation as well 2016-17: 6,34014

Foundation Amount (“Base Cost”) When the Pupil Needs Index and Regional CostIndex are applied to the Foundation Amount, thetotal per pupil operating/instructional need forindividual districts ranges from 7,000 to 16,700.This represents a total need funded by both localand state funds. When adjusted for a local contribution, the stateaid per pupil ranges from 500 to 14,600.15

Foundation Aid FormulaFoundationAmountPupil NeedsRegionalCostLocalContributionThe above formula creates a “total” aid amount, which is provided over amultiple year period.16

Pupil Needs Index (PNI) Adds a multiplier ranging from 1.0 to 2.0 on the FoundationAmount, based on pupil weightings for students eligible forFRPL, a Census poverty measurement, English languagelearners, and a measure of rural sparsity. The more of each of those categories, the greater theweighting, and the larger the index level. Consolidates weightings for student need from other separateaids prior to 2007. Example: The adjusted Foundation Amount for three differentdistricts— PNI is 1.0: 6,340 PNI is 1.5: 9,510 PNI is 2.0: 12,68017

The Pupil Needs Index drives funding to districts withhigh needs. The higher the level of pupil needs, themore aid the district will receive.Foundation Aid/Pupil v. PNI by School District2.0001.800Pupil Need IndexGreater Student Needs1.9001.7001.6001.5001.400High NeedAverage NeedLow 012,00014,000Foundation Aid per PupilMore Foundation Aid18

Foundation Aid FormulaFoundationAmountPupil NeedsRegionalCostLocalContributionThe above formula creates a “total” aid amount, which is provided over amultiple year period.19

Regional Cost Index Education Law §3602(4)(a)(2) : “The regionalcost index shall reflect an analysis of labor marketcosts based on median salaries in professionaloccupations that require similar credentials tothose of positions in the education field, but notincluding those occupations in the educationfield ” While SED updates the RCI every 3 years, theindex used in formula is from 2006 and is frozen instatute and does not change with the updates.20

Regional Cost Index The RCI provides an additional weighting to theFoundation Amount to account for cost of livingdifferences across the state. Example: District in Hudson Valley, PNI 1.5: 9,510 X 1.314 RCI 12,496 Adjusted Foundation Amount District in Capital District, PNI 1.5: 9,510 X 1.124 RCI 10,689 Adjusted Foundation Amount District in Mohawk Valley, PNI 1.5: 9,510 X 1.000 RCI 9,510 Adjusted Foundation Amount21

Foundation Aid FormulaFoundationAmountPupil NeedsRegionalCostLocalContributionThe above formula creates a “total” aid amount, which is provided over amultiple year period.22

Local Contribution Traditionally, education funding is a partnershipbetween the state and local level, such that bothparties have at least a minimal contribution to theoverall amount. The “Foundation Amount” represents a totalhypothetical cost level. We deduct a localcontribution from that amount to determine thelevel of Foundation Aid.23

Local Contribution The actual formula calculating the localcontribution is the most complicated of the “fourmoving parts.” The simplest explanation is that the calculationgenerally results in districts with high wealth perpupil having the highest contribution, and districtswith the lowest wealth also have the lowestcontribution.24

The greater the level of the expected local contributionby a district, the lower the amount of aid is that theywill receive.Foundation Aid/Pupil v. Local Contribution by DistrictLocal ContributionGreater Local Contribution14,00012,000High Need10,000Average Need8,000Low 00014,000Foundation Aid per PupilMore Foundation Aid25

Local Contribution - IWI Example: Income Wealth Index (IWI) Minimum The Legislature often enacts multiple choices within aidformulas, and districts receive aid based on the mostbeneficial calculation The IWI is one component of one of 26two choices in calculatingthe local contribution. It is a measure of district income wealth relative to thestatewide average—an IWI of 1.0 means a district is average,0.5 means it is at 50% of the average, etc. Statute currently sets a floor of 0.65; this means that anydistrict with and IWI that is less than 65% of the statewideaverage is “capped” at that 65% level, artificially inflatingsome districts’ wealth26

Local Contribution - IWI As of 2016-17, there are 318 (of 674 districts) withan IWI less than 0.65. If the minimum were eliminated, 150 of the 318would see a net benefit.27

2017-2018 Board Priorities What will the Board priorities be for the coming year? Foundation Aid Phase-in Remaining (similar to GEA in thatadditional funds need to be provided over time): Should theformula be phased-in over a particular period? Formula Structure: Are there any structure changes toconsider? Weightings: Should any of the various weightings be adjusted,or new ones added?28

2017-2018 Board Priorities What other policies should be considered? Last year’sincluded: Support for Struggling Schools - 75M Expansion of Prekindergarten Programs – 125M Professional Development - 45M Support for English language learners - 75M Funding for Family and Community Engagement - 25M(Enacted, expect to continue) College & Career Pathways - 65M Digital Learning - 50M29

Thank you30

Pre-Foundation Aid Funding Prior to Foundation Aid, multiple aid categories allocated funding to address particular needs: Flex Aid: general operating support, based on existing formulas prior to 2007 Limited English Proficiency Aid: support for

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