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Campaign for Fiscal Equity

Tue, Jun 30, 2009

CFE Analysis of New York City's Approved SY2008-09 Contract for Excellence

Shows Supplanting of Almost $250 Million in Contract for Excellence Funds during 2008-09 School Year

CFE’s analysis of the allocations of the NYC Department of Education’s approved 2008-09 Contract for Excellence state funds— provided to resolve the Campaign for Fiscal Equity litigation— shows that the DOE used $243 million of the $388 million in Contract funds allocated last year to fill the gap created by the underfunding of the DOE’s Fair Student Funding initiative, which should have been paid by the city’s tax levy dollars. Download the full analysis.

In April 2007, the New York State Legislature with the leadership of the Governor passed historic education legislation that provided for a multi-year infusion of new school funding; the creation of a clear cut system of accountability for new funds distributed under the legislation; and a fair and simple funding formula, known as Foundation Aid. The legislation provided a four-year commitment to increase state education funding levels to supply adequate resources to districts across the state. To make certain that these new monies are spent wisely to improve teaching and learning for students with the greatest needs, the legislation requires that identified districts develop an annual Contract for Excellence specifying how the district will spend that part of its Foundation Aid subject to the legislation. The Contract for Excellence (Contract) must be developed with public input, enhance current programs or initiate new programs that employ improvement strategies approved by the State Education Department, and be submitted to the Commissioner of Education for approval. The legislation requires that each covered district be held accountable for implementing its approved plan and reaching its intended goals.

The legislation requires that schools use Contract dollars to fund one or more of the following six programs for school improvement:

  • Class size reduction;

  • Increasing time on task;

  • Improving teacher/principal quality;

  • Middle or high school restructuring;

  • Providing full-day prekindergarten or kindergarten; and/or,

  • Model Programs for English Language Learners (ELLs).

For the 2008-09 school year, the State provided $388 million in new Contract money to New York City schools. The Campaign for Fiscal Equity (CFE) conducted analyses of both the Department of Education’s (DOE) July proposed distribution and the State-approved distribution of the funds. Both analyses were based on data available from DOE. The 1,439 schools receiving Contract dollars represent 100 percent of New York City’s public schools excluding District 75. DOE allocated no Contract dollars to District 75 schools.

Comparison of Proposed and Approved Allocations
The approved allocation of Contract dollars exceeded the proposed allocation by almost $9 million and also directed $20 million, previously shown as a citywide allocation, to schools. Three new programs and changes to existing programs account for the additional $29 million in Contract dollars allocated to schools. Allocations to the new programs – ELL Success Grants, Middle School (MS) Success Grants, and School Restructuring – totaled $25 million. An additional $3.8 million in Contract dollars was allocated to three existing DOE programs –Discretionary, Collaborative Team Teaching (CTT) Programs, and CTT fringe. Approximately $1.2 million was re-allocated from fringe benefits for summer school staff to the summer school program.

Approved Allocations by Program Area
The chart below shows that DOE allocated the largest percentage (39 percent) of Contract dollars for use in reducing class size. On average, schools in each category of student need and each grade organization group allocated the largest percentage of Contract dollars to reducing class size.

08-09 analysis chart

Within the class-size reduction program, less than one-third of funding ($46 million) was allocated to creating additional classrooms. Nearly $104 million was allocated for reducing teacher-student ratio through team-teaching strategies. More than $30 million in Contract dollars was allocated to three strategies in two other program areas: instructional coaches for teachers (improving teacher/principal quality) received $44 million; dedicated instructional time and lengthened school year (both increasing time on task) received $42 million and $31 million, respectively. No other strategy was allocated more than $30 million.

Compared with the previous year, the 2008-09 Contract allocated a smaller percentage of Contract dollars to reducing class size and larger percentages for increasing time on task and improving teacher/principal quality. In 2007-08, 59 percent ($152 million) went to reducing class size; $48 million (19 percent) to increasing time on task, and $40 million (15 percent) to improving teacher/principal quality. Allocations for full-day pre-kindergarten increased from $182 thousand in 2007-08 to nearly $5 million, a 27-fold increase.

Approved Allocations by Need Quartile
Commissioner’s Regulations require that 75 percent of Contract dollars be allocated to schools where the concentration of student need is above the City median (the 75/50 rule). To accomplish this objective, schools are divided into four quartiles according to measures of poverty, limited English proficiency, disability, and performance. The conclusion of CFE’s analyses is that New York City’s approved allocation of Contract dollars complies with this requirement.

Need Quartile $$ Allocated Enrollment

above/ below

1 Low Need



2 Low Need



3 High Need



4 High Need



Total Contract Dollars




Supplanting City Dollars with Contract Dollars
The State-approved distribution leaves open the issue of whether DOE used Contract dollars to supplant City dollars. Section 2576.5b of State legislation on mayoral control states that: “The city amount (expenditures funded by city funds for the support of city school district of the city of New York, not including debt service or pensions) shall not be less than the city amount appropriated in the base year as determined at the time of adoption of the budget for the ensuing fiscal year.”

The City has met the requirement to invest no fewer dollars in the schools in 2008-09 than in the previous year by allocating an additional $400 million. However, the City’s allocation of tax levy dollars was insufficient to fully fund schools using the Fair Student Funding formula, forcing the City to reduce the Fair Student Funding allocation to schools by $430 million. According to Chancellor Klein, the schools needed an additional $809 million to maintain 2007-08 services. The supplanting issue relates to the way that DOE allocated funding to restore schools’ spending power to their 2007-08 levels. In principle, to avoid supplanting, a district should distribute tax levy and unrestricted State dollars equitably among schools before allocating Contract dollars. The evidence demonstrates that New York City did not apply that principle.
According to DOE’s June 30 allocation file (sam_04), $120 million in tax levy funds, $89 million in Teacher Legacy funds, $64 million in previously undistributed Contract funds, and $179 million in discretionary Contract funds were used to ensure a minimum net change of $0 in each school’s Fair Student Funding. These Contract allocations totaling $243 million were explicitly used to supplant reductions in funding from the tax levy and other unrestricted dollars. While DOE distributed 75 percent of Contract dollars to High Need Schools, 86 percent of the $120 million new tax levy dollars was distributed to schools below the median in student need. The teacher legacy funds, in contrast, were allocated evenly between Low and High Need Schools. Our analysis of the approved allocations indicates some limited re-allocation of Contract dollars to the highest need schools. The re-allocation was, however, insufficient to address the issue of supplanting.

Additional evidence of supplanting in the July allocations came from the distribution of the $30 million in Contract dollars that regulations allowed DOE to use for Continuation of Effort (COE); that is, to continue programs funded by Contract or tax levy dollars in the previous year. DOE, in its July proposed Contract, allocated the COE funds exclusively to High Need Schools to maintain summer school programs. Summer school programs in Low Need Schools were maintained with City or unrestricted State dollars. By not dividing the COE funds equitably, DOE deprived High Need Schools of Contract dollars that might have been used for new or expanded programs to serve at-risk students. In its approved allocation, DOE partly addressed this issue by allocating 18 percent of the COE funds to Low-Need Schools.

The distinction between Contract and other dollars is important because of the restrictions on spending Contract dollars. With the exception of funds allocated for COE, Contract dollars cannot be used to maintain positions funded with tax levy or unrestricted State dollars in the previous year. Therefore, DOE’s distribution of tax levy and Contract dollars provided Low Need Schools with greater flexibility to maintain 2007-08 programs.

A second distinction between Contract dollars and tax levy and unrestricted State dollars is that fringe benefits for staff hired with Contract dollars must be paid from Contract dollars in the school’s budget, while fringe benefits for other staff are paid by tax levy. Fringe benefits for summer school and CTT-program staff funded by Contract dollars were taken from Contract dollars allocated to schools with these programs further reducing the spending power of High Need Schools. In the approved plan, 74 percent ($16.7 million) of fringe benefits to be paid with Contract dollars would be paid by High Need Schools.

Accountability for Continuing Contract Programs
Section 6807-C of Education Law requires each district with Contract dollars to support and maintain in succeeding years the programs approved by the Commissioner in the base year or use the funds to support new or expanded allowable programs. In 2008-09, New York City is accountable for the expenditure of $645 million, including the $258 million allocated in 2007-08. New York City has provided neither the required documentation showing the actual 2007-08 expenditures of Contract dollars nor documentation of the continuation or replacement of the approved programs initiated in 2007-08.

CFE acknowledges that DOE has met the requirement to distribute Contract dollars to schools according to concentration of need using the 75/50 rule. CFE believes, however, that the Contract dollars will have the greatest impact on performance if they are focused on a smaller group of schools, particularly those in Need Quartiles 3 and 4. Further, CFE believes that, in schools without exceptionally high concentrations of need, schools should target Contract dollars to those students with the greatest need.

CFE believes that DOE should be required to maintain programs and teachers funded with tax levy and unrestricted State funds from year to year using those funds. If economic difficulties make it impossible to provide sufficient City funds to continue those programs, cuts should be made proportionately across all New York City schools. High Need Schools should not be more dependent than Low Need Schools on Contract dollars to maintain programs formerly funded by other dollars.

To evaluate the effectiveness of Contract dollars, DOE must comply with the statutory requirement to provide expenditure information at the school level. This budget information should identify the specific groups that benefited from each intervention: e.g., the principals that received training; the teachers that received mentoring; and the grades, subjects, and demographic groups for whom class sizes were reduced, school days or school years lengthened.

At the end of four years, DOE will need to demonstrate performance improvements attributable to the total Contract dollars allocated over that time. To this end, it is essential that DOE and other districts receiving Contract dollars keep careful electronic records specifying the participation of students in programs funded with Contract dollars. Those records will allow independent researchers to evaluate the effect of Contract dollars on student performance.

Information on what was purchased with Contract dollars and identification of students benefiting from the programs is essential to evaluating the programs funded with Contract dollars and identifying those programs that are most effective in raising the achievement of specific groups of children. It is critical that the most effective programs be identified and replicated. Failure to show a strong link between programs and results will place continued funding at risk.

Parents from across the state march on the Capitol in Albany to show support for CFE.
CFE Litigation CFE v. State of New York
In 2006, after 13 years in the Courts, the New York State Court of Appeals affirmed the right of every public school student in New York to the opportunity for a sound basic education and the state’s responsibility to adequately fund this right, but deferred to the Governor and the Legislature to determine the appropriate amount. more >