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Spring 2004
   
New York’s Fiscal Equity Follies
Sol Stern
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In May 1993, attorney Michael Rebell filed a class action lawsuit against the state of New York, charging—incontestably, you’d think—that New York City schoolchildren were not receiving the “sound basic education” that the state’s constitution guarantees. But what makes Campaign for Fiscal Equity v. State of New York such a historic case isn’t its premise, but its outcome. After more than a decade of litigation, the New York Court of Appeals, the state’s highest, agreed with the trial judge’s original ruling: lack of state funds was the reason for the miseducation of the city’s children—and the state had better find some way to solve the money problem, fast.

Too bad both courts waved aside a mountain of evidence that shows that money isn’t the culprit. Gotham’s schools should be Exhibit A—dismal, even though they spend more per pupil than all but two states in the union and than 90 percent of New York State’s districts. The real problem with Gotham’s public schools is the city’s dysfunctional and unaccountable school system. Simply providing that system with more money, as the Campaign for Fiscal Equity decision calls for, without changing where that money goes, won’t improve things, but will only entrench the problems more deeply. Worse, the court ruling threatens to place the city’s education policy in the hands of judges and lawyers—a recipe for disaster, as precedents amply suggest.

If the Campaign for Fiscal Equity (CFE) lawyers were serious about fixing the schools, they’d be pushing for complete overhaul of the school system. Instead of using the courts to raise salaries for every teacher, good or bad (which is what any new funds will likely pay for in the current unreformed system), CFE would propose energizing the profession by paying teachers more only for superior performance. The group would insist on tested methods for teaching kids how to read and do math, not progressive fads. And since competition tends to force public schools to improve to keep their clientele, CFE might even consider supporting school choice for parents. Indeed, true “equity” in education would assign each child in the state an equal sum of money and then let him take it with him to any school he chooses to attend—public, charter, or private.

But CFE has never shown the least interest in such potentially effective reforms. From the outset, it has preferred to emphasize racial grievance and victimhood in order to justify raiding the state treasury. Significantly, CFE’s most prominent founding figure, apart from Rebell, is Robert Jackson, a black trade-union official and, these days, one of the New York City Council’s most radical members. In the early 1990s, Jackson was president of the Washington Heights community school board in Manhattan. His three daughters went to city public schools at the time, and he felt justifiable outrage over the poor quality of their education. He couldn’t help but notice how much more wealthy suburbs spent on their public schools compared with what the city spent on his daughters’ schools. In the spirit of Jonathon Kozol’s Savage Inequalities, he came to believe that an uncaring racist society was deliberately holding back resources from schools with minority student populations.

Jackson approached Rebell, the community school board’s part-time lawyer and a self-styled “child of the sixties,” with a brainstorm. Why not go to court over this unequal funding? he asked. After all, such “fiscal equity” lawsuits had succeeded in courts in other states—though, as Jackson must have realized, those suits had not brought about the hoped-for school improvements. Twenty-five years ago in California, for example, a Robin Hood court decree mandating equalized funding for all the state’s school districts wound up hurting the schools, by a roundabout, unanticipated process. The decree helped spur a taxpayer backlash culminating in Proposition 13, which slashed revenue from property taxes by more than half and left local school districts totally dependent on state support. Severed from a fiscal relationship with their local communities, the schools grew much less responsive to parental demands, and worse as a consequence.

As it turned out, the California-style strict equity approach wasn’t available in New York anyway, since in a 1982 case, Levittown Union Free School District v. Nyquist, the court of appeals had already ruled that the state constitution did not require strictly equal per-pupil spending. But Rebell and Jackson had another legal tool at hand, based on the idea of “adequacy” of school funding, for which there also were legal precedents in other states, including Wyoming and Kansas. In a California-style equity case, lawyers argue that students and parents have had their equal-protection rights violated by the poor funding of their school district compared with other districts. In an adequacy case, funding levels in other districts are irrelevant. What the plaintiffs must show is, first, that the state constitution guarantees all children an adequate or “basic” education (as most do, including New York’s) and, second, that the resources available in a particular district are way too low to meet the constitutional standard.

When the CFE first filed its “adequacy” lawsuit against the state in 1993, the press described the court challenge as a classic David-versus-Goliath story—with CFE cast as little David. Many New York public school parents and education advocates felt the same way. For them, CFE’s litigator was an urban Atticus Finch out of To Kill a Mockingbird—a small-time lawyer who takes on the powers that be to seek justice for the disadvantaged.

But Michael Rebell was never the small-time lawyer, with only a desk and a shingle, that some made him out to be. He had already aggressively thrust himself into the workings of the New York City school system as a litigator for plaintiffs in the 1979 federal lawsuit Jose P. In that momentous case, Rebell and several colleagues successfully sued the city for failing to provide adequate services for students diagnosed as disabled and in need of placement in so-called special-education classes, as federal disability law demanded.

Having just skirted bankruptcy, the city admitted in the Jose P. proceedings that, for lack of funds, it hadn’t been able to meet federal disability requirements for the schools. Ultra-liberal federal judge Eugene Nickerson then pushed the city into signing a consent decree, which set up a formal process, essentially run by the lawyers, to micromanage special-education referrals from then on.

In effect, the decree placed part of the city’s education system in receivership—and set up Rebell as one of the trustees. Rebell and several other plaintiff lawyers became de facto chancellors of a separate education system—some observers even unofficially called them the Board of Special Ed. They could hire consultants, say how many social workers and special-ed evaluators were needed, and ask for more money for the program. At meetings, the “master,” an official appointed by Nickerson to oversee city compliance with the decree, often asked Rebell: “What should we do now?” Rebell would play this policymaking role for a quarter century (getting paid a handsome fee), and stepping away from his position only recently.

Jose P. became a paradigmatic example of the damage that judges and lawyers can do when they make education policy unbound by the real-world constraints that elected political leaders face, including the need to balance finite budgets. Under Rebell’s and the other plaintiffs’ lawyers’ trusteeship, the special-ed empire expanded inexorably. It soon included 150,000 students—up from 59,000 when the decree was signed—forcing the schools to hire thousands of extra teachers, social workers, special-education evaluators, and aides. The program grew so dramatically primarily because its overseers allowed it to become a perverse form of classroom management: most of the children in the program were not handicapped but were instead violence-prone troublemakers, labeled “emotionally disabled” or “learning disabled” by frustrated school officials as a way to get them out of regular classrooms and into special-ed classrooms, where they couldn’t disrupt other students.

The cost of the program has been staggering. By the mid-1980s, special-ed kids were getting $15,000 in per-pupil instructional expenses, compared with the $6,500 per kid that regular students received. Special ed now sucked up a full quarter of all the money that the school system spent—for only 14 percent of the kids.

Thus, when Rebell filed the CFE lawsuit in state supreme court in Manhattan in 1993, he was wearing two hats. In one courtroom, he was charging that the education system wasn’t getting enough state money. In the other, he continued to press for diverting even more resources from the existing budget toward special education—a major reason the schools might have seemed less than adequately funded in the first place.

By the time Judge Leland DeGrasse banged his gavel to open the fiscal equity case on October 12, 1999, it was clear that CFE had become the real courtroom Goliath. Rebell had assembled a legal, political, and public-relations juggernaut. Generously funded by the Ford, Rockefeller, and other liberal foundations, CFE boasted a staff of a half-dozen or so young professionals and several other lawyers. A dozen or so major left-wing political and community organizations and trade unions were on board—above all, the powerful UFT, which stood to gain more dues-paying teachers and better pay for its members if CFE won. Local politicians, including then-mayor Rudy Giuliani and especially the Democrats, also declared support. Perhaps Rebell’s biggest coup was to obtain the ostensibly pro bono services of the white-shoe law firm Simpson Thacher and Bartlett. Heading the team of more than 20 partners and associates on the case was Joe Wayland, one of the firm’s best litigators.

George Artz’s high-powered and politically connected public-relations agency was also in the plaintiffs’ corner, for a fee. When an important expert was about to testify for CFE, the PR firm would release the testimony to the press a day early, to spin the coverage. This tactic worked like a charm. On the morning that SUNY-Albany professor Hamilton Langford testified for the plaintiffs about the negative effect of low salaries on the city’s ability to recruit qualified teachers, to take one instance, the Times, Newsday, and the Daily News ran almost identical stories—presenting the professor’s data and quoting plaintiffs’ lawyers on the import of the testimony. Defense lawyers could offer no comment in the stories, since they hadn’t yet heard the testimony.

Throughout, the press stuck to its David-versus-Goliath scenario, openly cheering for the “underdog” CFE. Some reporters and columnists even slimed the private Atlanta law firm representing the state. New York Times columnist Bob Herbert hinted that the lawyers from “down South” were racists: they had previously defended cities and states fighting desegregation suits, and racism was likely at work here, too, Herbert implied. Hadn’t the attorneys pulled in “millions of taxpayer dollars . . . to undermine the interests of the ethnic minorities and newly arrived immigrants” in Gotham’s public schools?

By contrast, the press depicted the plaintiffs’ lawyers as selfless heroes, fighting for the children. And Simpson Thacher’s Joe Wayland was the biggest hero of all, logging upward of 6,000 purportedly pro bono hours on the case. In public, he spoke passionately about the need for equity, reminding everyone that he was a product of New York’s public schools. I once saw him break down discussing the case at an education conference; the audience erupted in an Oprah-style standing ovation. In an interview, Wayland contrasted his own children, who attended exclusive private schools, with the poor New York City kids condemned to decrepit public schools. “My kids get small class sizes, multiple specialists, well-trained teachers, great support staff,” he observed. “It costs more than $20,000, and they don’t even need it.” He seemed genuinely moved by the injustice of it all.

But all this selflessness clearly had limits. After the court of appeals decision last year, the plaintiffs’ attorneys asked the trial court for a total of $21 million in fees. Michael Rebell put in for $2.5 million, at $475 per hour, and Wayland asked for $3.27 million, at an average hourly wage of $551—a pretty good “pro bono” haul. Whatever the amount that the trial judge ultimately grants, New York taxpayers will foot the bill. Not a single reporter wrote a story about the fee requests.

It was bad enough that the state’s lawyers entered the trial facing a hostile press and opposition from the city’s political and educational establishments. Worse still, merely by filing this case in Manhattan, CFE guaranteed that it would get a judge with politically correct attitudes and affiliations, further increasing the state’s disadvantage.

The reason is simple. There are no open primaries for New York Supreme Court judgeships. County leaders select the candidates at a judicial convention. And since in Democrat-dominated Manhattan, Republicans rarely bother to field judicial candidates in the general election, the pre-chosen Democratic judges almost always run unopposed. No one gets to be a judge in a state court in Manhattan who would question Democratic Party orthodoxy on public policy issues—including education policy.

When the case landed in Leland DeGrasse’s lap in 1993, though, it was particularly good fortune for CFE. DeGrasse and his wife, Carol Huff, also a judge, were both elected to the New York Supreme Court in 1988, after previously serving on the civil court. They were two of three black candidates for court openings handpicked that year by New York County Democratic boss Herman (Denny) Farrell, who rammed his choices through the party judicial convention. (The candidates then, as usual, ran unopposed in the general race.) Farrell made no bones about it: he had chosen the three judges to maintain existing “racial balance” on the court. Thus, in a highly charged case that basically pitted the local political and education establishments against Republican governor George Pataki (a case also with racial overtones), the presiding judge owed his appointment to a Democratic Party boss who keenly wanted to see more state education dollars coming to the city.

Farrell must have been satisfied with how the case proceeded. Judge DeGrasse seemed to make little effort to establish an evenhanded atmosphere in his courtroom. Though no jury was present, plaintiff lawyers and CFE enjoyed virtual free rein to play to the media, and through the media to the public. The whole business often seemed like a show trial. The CFE worked with the Board of Education, for example, to troop high school students into the courtroom, ostensibly to teach them how democracy and the court system work but in reality to keep the purported beneficiaries of a pro-CFE ruling always in the media eye. (It’s doubtful that the students heard any lessons on how the judge got his job.) A steady stream of visitors from the school-system hierarchy also thronged the courtroom. At one session, Schools Chancellor Harold Levy theatrically stormed out after a state witness dared claim that the city had sufficient money to run the schools effectively.

DeGrasse’s lack of evenhandedness extended to what testimony and evidence he would allow. While he let the plaintiffs parade to the witness stand UFT president Randi Weingarten and Chancellor Levy—despite their institutional ties to the school system, which gave them a direct financial stake in the trial’s outcome—he excluded potentially significant evidence that the state sought to submit. The state had brought in an independent research group, Management Analysis and Planning (MAP), to study how much a “sound basic education” in New York City should really cost. In the MAP “costing-out” study, a so-called professional judgment panel, made up mainly of principals and superintendents from districts outside New York City, constructed an imaginary “adequate” budget for an education system with demographic characteristics similar to New York’s, and then compared it with the real city school budget. MAP’s finding: “The financial resources available to New York City Public Schools are adequate to provide the state-specified ‘opportunity of a sound basic education.’ ” Though judges have allowed this kind of research methodology as evidence in fiscal adequacy cases in at least two other states, DeGrasse quickly agreed with the CFE lawyers that the report was mere “hearsay” and chucked it out.

After the nine-month trial, DeGrasse ruled decisively in CFE’s favor. The state, he held, must substantially boost its funding for New York City schools so that the city could hire more qualified teachers, reduce class size (one of the judge’s policy favorites), and fix up school buildings, among other improvements.

Swelling a chorus of acclaim, the New York Times hailed the judge’s 180-page opinion as “carefully argued,” but it was mostly a rehash of the plaintiffs’ lawyers’ own arguments. DeGrasse accepted almost every piece of evidence that the plaintiffs presented—even personal and subjective opinions—as “probative,” yet consistently rejected scholarly evidence offered by the state.

One example will suffice. DeGrasse writes: “[P]laintiffs offered probative evidence that the totality of conditions in crumbling facilities can have a pernicious effect on student achievement.” And what might this evidence be? DeGrasse points to this witness-stand rumination from former state education commissioner Thomas Sobel: “If you ask the children to attend school in conditions where plaster is crumbling, the roof is leaking and classes are being held in unlikely places because of overcrowded conditions, that says something to the child about how you diminish the value of the activity and of the child’s participation in it and perhaps of the child himself.” If, Sobel continued, “you send a child to a school in well-appointed facilities that sends the opposite message. That says this counts. You count. Do well.”

DeGrasse found this pop psychology persuasive. But he quibbled endlessly with a rigorous statistical study by Eric Hanushek, one of the nation’s leading education economists, which demolished the hypothesis that schools in disrepair cause poor student performance. And he performed extraordinary legal jujitsu to evade one of the most powerful contentions in the state’s case: that so dysfunctional was the existing New York City educational system that corruption, fraud, and waste were bleeding it of money that should be going right into the classrooms—and that therefore the school system should be required to clean up its act before anyone entrusts it with a single additional taxpayer dollar. But in the contorted logic of DeGrasse’s opinion, any fraud or waste in the city’s school system was really the state’s fault, since school districts are legal creations of the state and subject to state regulation. Therefore, the way Gotham’s educational system squanders its money with shameless abandon is irrelevant to whether the city’s schools have sufficient funds.

Astonishingly, even as the trial moved along, CFE’s argument that more money would improve New York City’s public schools was receiving a real-life test—not that any of the judicial proceedings noticed it. From 1997 to 2002, spending on the city’s public schools rocketed from $8.8 billion to $12.5 billion—a whopping 42 percent increase in inflation-adjusted dollars. That additional $3.7 billion brought per-pupil spending in the city almost to $12,000, well above most districts in the state and the nation. Most of the extra funding, moreover, went for precisely the budget items that Judge DeGrasse believed would lift student achievement: class size in the early grades, for example, fell from an average 25 to 21; the schools hired thousands of new teachers; and all city teachers won salary hikes of 16 to 21 percent.

The results were underwhelming. Though fourth-grade reading scores did tick up somewhat, overall academic performance stayed stagnant. More than half of the city’s children still can’t read at grade level, and only 15 percent of the students graduated with a Regents diploma.

During the appeals process, many other judges got to review DeGrasse’s fateful 2001 decision. The appellate division voted four to one to overturn it. But the final verdict came from the court of appeals, which reinstated the original ruling.

If the four court of appeals judges who upheld DeGrasse (one judge again dissented) were unimpressed by the extra $3.7 billion per year spent by the city schools, though, you would think that they would at least say exactly how much more money would meet the constitutional standard. But in their only concession to the separation of powers, the judges tossed that hot potato back to the legislature and the governor, who must come up with a solution and present it to DeGrasse this July. CFE will be present in court, representing the plaintiffs.

Little wonder that the legislature now finds itself in turmoil over the financing issue. The premise behind the court’s decision is absurd. There is no magic level of funding that we know will provide all children an opportunity for a decent education.

CFE, though, seems to revel in the absurdity. The organization recently spent over $1 million on another costing-out study for New York City’s schools that would at last find the magic number. With no apparent embarrassment, CFE turned around and hired MAP—the same group whose earlier report the plaintiffs had had thrown out of evidence in the trial—to do the new report, along with one other outfit. This time, though, the professional judgment panels preparing the New York City calculations consisted solely of administrators, principals, and teachers on the city’s Department of Education payroll. As one might expect, the DOE employees proved very generous with taxpayer money: the preliminary report concluded that the city schools need yet another $3.7 billion per year. A few weeks later, Michael Rebell arbitrarily raised CFE’s estimate of the amount of new yearly education dollars the schools required by another couple of billion dollars.

Left unmentioned in the CFE-commissioned report was the fact that the state’s projected budget deficit was a dizzying $6 billion. In other words, after a decade of litigation that has cost taxpayers at least $50 million, CFE has managed to divert public discussion away from serious education reform to an Alice in Wonderland dispute about money the state doesn’t even have.

Still, it wouldn’t be prudent to dismiss CFE’s demands as mere fantasy. DeGrasse stands ready to give out the equivalent of “go to jail” cards if he doesn’t get satisfaction from Albany. In his 2001 decision, he warned: “The court will not hesitate to intervene if it finds that the legislative and executive branches fail to devise and implement necessary reform.”

It was with similar cockiness that judges in other jurisdictions have vaporized billions of taxpayer dollars for uninformed schemes to improve education for disadvantaged children. Notoriously, federal judge Russell Clark ran the Kansas City schools from 1985 to 1997, implementing a desegregation plan designed to attract white students to the city schools. Clark had hundreds of extra teachers hired and required the creation of 15 new schools, including one with an Olympic-size swimming pool. But after 12 years and $2 billion in extra taxpayer money, as even Clark had to concede, the Kansas City schools hadn’t improved one whit. This experiment in judge-ordered “adequacy” was a profound and costly failure.

Undeterred, DeGrasse is laying out a roadmap for a similar judicial intervention in New York City that could end up calling many of the shots for a 1.1 million–student school system. DeGrasse recently told lawyers for both sides that he wanted to hold regular conferences to exchange views on how the compliance phase was proceeding. He also said that he might appoint a master to work with the lawyers to ensure compliance, the same recipe (and the same personnel) that gave us the Jose P. special-ed disaster.

One nostrum DeGrasse might well decide to embrace would be across-the-board class-size reductions, which the judge considers key to raising student achievement. Trouble is, the scant data show that smaller classes only improve schools if the reductions are deep enough—to 14 or fewer kids per class—and only for the early grades. But the cost of such an across-the-board reduction in New York would be completely prohibitive. What’s more, when California tried a $1 billion per-year statewide class-size reduction in 1996, the result was that districts hired so many more teachers so quickly that the overall teaching quality dropped, negating any benefits from the smaller classes.

Governor Pataki is probably the only New York public official with enough clout to derail the runaway train set in motion by Campaign for Fiscal Equity v. State of New York. Unfortunately, throughout the CFE lawsuit, he seems to have done everything to avoid taking a principled stance. “The governor’s strategy on this is to keep kicking the can down the street,” said one person close to the administration.

The cash-strapped governor should take to the bully pulpit and remind the public of the folly of turning over educational policy to the judiciary, as in Jose P. or Kansas City. He should vow to make new education investments only for programs that have a successful track record. And, considering the stakes, he should change the terms of the debate, endorsing vouchers and school choice as the only sure way to rescue the city’s children from their iniquitous school system. Let the governor offer a $200 million “down payment” for a program that would liberate black and Latino children from the awful public schools that make Joe Wayland cry. Then let CFE dare say that this isn’t the equity for disadvantaged children it had in mind.

But if the governor fails to act, beware the mischief coming from Judge DeGrasse’s courtroom.

Research for this article was supported by the Brunie Fund for New York Journalism.

 

 

 
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