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

This report is the sixteenth 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 1998-1999 to 2002-2003 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).

In addition, most districts were experiencing a decline in the K-12 enrollment. When analyzed on a per pupil basis, this decline in pupils resulted in even larger State aid increases.

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 1998-99 and 2002-03, revenues from State sources increased by more than $4.6 billion. These years witnessed a substantial increase in State Aid (approximately $2.6 billion) and the implementation of the School Tax Relief Program (STAR) in 1998-99, which in 2002-03 provided over $2.6 billion in State revenues to school districts to help reduce the property taxes of homeowners.

As previously noted, the pattern in school district enrollments also changed. A long decline in K-12 enrollment (approximately two decades) concluded with the 1990-91 school year. This enrollment increase combined with the low increases in State Aid typical of the early 1990’s meant that State aid increases per pupil were relatively modest.

Even when record increases in revenues from the State are provided, increasing pupil counts dampen the effect of such increases on individual students. The effects of inflation and enrollment growth can perhaps be best understood with a few examples. The $8.1 billion (27.6 percent) increase in total expenditures between 1998-99 and 2002-03 translated into an increase of $2,714 (26.2 percent) per pupil. However, after adjusting for inflation, 2002 expenditures were worth $11,133 per pupil in 1997-98 dollars. In short, after adjusting for inflation the 2002-03 statewide average expenditure per pupil was $1,452 more (14.0 percent) in 2002-03 than it had been in 1998-99. Thus, a 27.6 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 2002-03 school year. Thus, any districts that combined (e.g., consolidation, merger, annexation) between July 1, 1999 and July 1, 2002 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.

An increasingly 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 Federal, State and local sources and expenditures to support State and Federal categorical programs. Revenue and expenditure figures include the General Fund, the Special Aid Fund and the Debt Service Fund.

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

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 1998-99 To 2002-03

General Revenue and Expenditure Trends

Grand Total Revenues

Total revenues for the period increased by 27.3 percent (15.1 percent after adjusting for inflation). Total revenues per pupil increased from $10,317 to $12,991 or 25.9 percent. After adjusting for inflation, 2002-03 revenues per pupil represented $11,738 per pupil in 1998-99 constant dollars, an increase of $1,421 or 13.8 percent. Total revenue of school districts increased by $8.0 billion and revenue from State sources increased by $4.6 billion or 57.9 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 $2.6 billion. The second component consisted of School Tax Relief (STAR) payments from the State to school districts for exemptions to homeowners(3) and provided $2.6 billion(4) in revenue to school districts in the 2002-03 school year.

Revenue from local sources increased by $2.5 billion (16.7 percent) between 1998-99 and 2002-03. Revenue from Federal sources represented only a relatively small portion of the increase in total revenues. Out of a total increase in revenue of $8.0 billion, revenue from Federal sources accounted for only $796 million (about 10.0 percent) of the increase. Revenues from State sources traditionally constitute approximately two-fifths of the total revenues of school districts. Revenues from State sources (including STAR) accounted for almost half (46.0%) of total revenues in 2002-03.

Figure 1(7) shows that the “State share” and “Federal share” of total revenues increased during the period. The State’s share (including STAR) increased by 3.3 percentage points and Federal share increased 1.1 percentage point. Conversely, the local share of total revenues declined by 4.4 percentage points. Nonetheless, local revenue remained the largest source of school district funding.

Revenues: State Sources

Although revenues from State sources increased 37.0 percent in current dollars, after being impacted by the change in pupils and inflation the increase was considerably lower on a per pupil basis (22.4 percent). STAR was responsible for 44.8 percent of the increase in revenues from State sources.

Revenues: Local Revenues

Statewide, revenues raised locally increased by 16.7 percent (an increase of 5.5 percent after adjusting for inflation). On a per pupil basis, local revenues increased from $5,434 to $6,271, a change of $837. After adjusting for inflation, the change in local revenues per pupil for the period was an increase of $232.

A simple recitation of figures masks the complexity of the local revenue picture. 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 increased local revenues for education several times during this period, but witnessed a decline in 2001-02 following the terrorist attack on the World Trade Center.

Revenues: Federal Sources

Statewide, revenues from Federal sources increased by 59.2 percent (43.8 percent after adjusting for inflation). Figure 1 (above) shows that the Federal increase in revenue was noticeably lower than the State’s increase. On a per pupil basis, revenues from Federal sources increased from $473 to $745 (57.4 percent). After adjusting for inflation, the per pupil increase was $200 or 42.2 percent.

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 $193.7 million or 19.3 percent (7.8 percent after adjusting for inflation) during the period.

Total Expenditures

The pattern in total expenditures was similar to the patterns discussed for revenues. Statewide, total expenditures increased by $8.1 billion or 27.6 percent. After adjusting for inflation the increase was 15.3 percent. On a per pupil basis, total expenditures increased by 26.2 percent (from $10,371 to $13,085). After adjusting for inflation, total expenditures per pupil increased by 14.0 percent 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 2002-03, expenditures for teacher salaries were approximately 38.1 percent of all expenditures by school districts. During the period, expenditures for teacher salaries increased 23.9 percent (12.0 percent after adjusting for inflation). On a per pupil basis, expenditures for teacher salaries increased by 22.5 percent (10.7 percent after adjusting for inflation).

PPS Instructional Salaries

PPS instructional salaries decreased by approximately $9.6 million or -1.8 percent during the period. This development continued a trend identified in the previous edition of the Profiles. PPS was the only category of instructional expenditures to decrease during this period; clearly districts restrained spending for pupil personnel services. On a per pupil basis, expenditures decreased by $5 or 2.7 percent (a decrease of 12.1 percent after adjusting for inflation).

Curriculum development/supervision instructional salaries increased by 28.6 percent (16.2 percent after adjusting for inflation) during the period.  On a per pupil basis, expenditures increased by $70 or 27.2 percent (14.9 percent after adjusting for inflation).

BOCES instructional expenditures increased 21.9 percent (10.1 percent after adjusting for inflation) during the period.  On a per pupil basis expenditures increased by $90 or 20.4 percent (8.8 percent after adjusting for inflation).

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 42.1 percent (28.4 percent after adjusting for inflation) during the period. On a per pupil basis expenditures increased by $94 or 40.6 percent (26.8 percent after adjusting for inflation). These increases were unusually high compared to other categories of expenditures during this time period; however, tuition remains one of the smaller cost centers.

Other instructional salaries increased by 27.6 percent (15.3 percent after adjusting for inflation) during the period. On a per pupil basis expenditures increased by $201 ($108 after adjusting for inflation).

Other instructional expenditures increased by 48.7 percent (34.4 percent after adjusting for inflation). On a per pupil basis expenditures increased by $262 ($183 after adjusting for inflation). Districts continued to invest in Other Instructional Expenditures, which include instructional technology, during this period.

Employee Benefits

Expenditures for employee (fringe) benefits are an important component of school district expenditures; in 2002-03, expenditures for fringe benefits amounted to 16.4% of total expenditures. The total increase in employee benefit expenditures was substantial ($1.8 billion) but the three individual categories fluctuated widely. Health insurance ($988 million) and other employee benefits ($714 million) increased substantially, whereas teacher retirement expenditures increased modestly by $69 million.

Employee Benefits: Teacher Retirement.

During the period, teacher retirement expenditures increased statewide by 10.9 percent (0.2 percent after adjusting for inflation). On a per pupil basis, expenditures for teacher retirement increased by 9.6 percent (-1.0 percent after adjusting for inflation). This increase, although modest, represents a significant change from previous years, in which teacher retirement expenditures decreased due, at least in part, to the excellent performance of the stocks by the New York State Teacher Retirement System during some of this period. Teacher retirement expenditures are expected to increase for several years, which will constitute a substantial burden for district budgets.

Employee Benefits: Health

Statewide, expenditures for health insurance increased by 55.1 percent (40.2 percent after adjusting for inflation). On a per pupil basis, expenditures for health insurance increased by 53.4 percent (38.6 percent after adjusting for inflation). Health insurance expenditures continue to be one of the fastest growing categories of expenditures.

Employee Benefits: Other Employee Benefits

This category of expenditures rarely receives much notice, as it is largely a combination of legally required benefits such as Social Security and unemployment insurance. Some other benefits, such as relocation assistance or child care assistance may be provided by districts. Expenditures for this category are substantial for districts, totaling more than $2.6 billion in 2002-03.

Debt Service

Debt Service expenditures began to ease over the period. To address increasing enrollments many districts had to construct new buildings and/or undertake major renovations of existing buildings during the 1990's. From 1998-99 to 2002-03, debt service expenditures increased a relatively modest 15.7 percent (4.6 percent after adjusting for inflation). Districts were clearly working hard to pay off debt; about 75% of the increase in debt service expenditures was paid on principal.

Wealth Measures

The property value per pupil displayed in Table 4 consists of the Actual Value (AV) Per Total Wealth Pupil Unit (TWPU) used in the Operating Aid Formula for the specified school year. During the period, the State average AV/TWPU increased from $246,400 to $264,200 an increase of 7.2 percent.

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 the Operating Aid Formula for the specified school year. During the period, the State average income/TWPU increased from $86,400 to $110,100 an increase of 27.4 percent.

Local Effort Rate

The local effort rate is similar to but different from the property tax. The State average local effort rate decreased statewide by $1.54 (from $18.40 per thousand to $16.86 per thousand) or 7.8 percent from 1998-99 to 2002-03. 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; 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) as a percent of total expenditure remained relatively constant between 1998-99 and 2002-03; in 2002-03 such instructional expenditures were $23.3 billion out of total expenditures of $37.6 billion (62.1 percent).

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 2002-03 such instructional expenditures were $29.3 billion out of total expenditures of $37.6 billion (77.9 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 2002-03, instructional expense was $28.7 billion out of total adjusted expenditures of $33.3 billion (86.2 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.