New York State now ranks number three in the nation in education spending, with a statewide per-pupil average of $14,000 a year; only New Jersey and Washington, D.C., shell out more per student. And New York City kids aren’t shortchanged: while per-pupil education spending in the city once slightly lagged the state average, the gap has narrowed to almost nothing. Earlier this spring, New York city councilwoman Eva Moskowitz, who chairs the council’s Education Committee, released a report showing that the Gotham schools’ operating budget has ballooned 50 percent over the last five years, to $13.5 billion. That figure, Moskowitz noted, doesn’t even take into account pension and benefit costs, representing another $2 billion annually, nor the billions the city spends on the schools’ capital budget and interest payments on school construction loans. All told, the real New York City education budget is zooming toward the $20 billion mark—over one-third of the total city budget. That works out to a jaw-dropping $18,000 per pupil.

With nearly $20 billion spent annually on the schools and 120,000 employees, including 80,000 classroom teachers, working in them, the city, a reasonable person would conclude, has more than enough resources to provide an adequate education for its 1.1 million students. In reality, the reason the city schools are so lousy—with student test scores dismal, despite an uptick this year, and dropout rates shamefully high—has nothing to do with money and everything to do with a dysfunctional and unaccountable school system.

Unfortunately, logic has been in short supply in the Wonderland-like courtroom of State Supreme Court Justice Leland DeGrasse, the trial court judge who has overseen the Campaign for Fiscal Equity (CFE) school-financing case that has inexorably moved through the New York state court system for the past 12 years. The suit has successfully charged that Gotham’s schools do not meet the state constitutional guarantee of an “opportunity for a sound basic education.”

This past February, the case hit the headlines after DeGrasse affirmed the recommendations of the three “special masters” he had appointed and ordered the state to cough up an extra $23.3 billion for New York City’s public schools over the next four years. The total includes $9.2 billion in capital funds and a phased-in $5.63 billion (40 percent!) annual boost in operating support, resulting in an average per-pupil operating expenditure (not including pension, benefit, or capital costs) of $18,000 per student. This figure would be nearly enough to cover tuition at one of the city’s elite private schools, where the CFE attorneys send their kids. It would be three to four times the cost of enrolling at one of the city’s well-functioning Catholic schools (which DeGrasse attended as a boy). Many of those schools are now closing up shop because working-class parents can’t afford the rising tuitions, modest as they are.

Governor Pataki has filed an appeal, and an appellate court will review the CFE case in October. The losing side will almost certainly appeal again, landing the case back in the court of appeals, New York’s highest, which has already ruled twice in the CFE’s favor. Before teachers’ union officials start popping champagne corks, however, they should consider three cold realities.

First: the money to pay for the court decision simply doesn’t exist. Thanks largely to the exploding costs of Medicaid and crazily generous government pension plans, both New York State and City face yawning structural deficits over the next several years. According to an analysis by Manhattan Institute senior fellow E. J. McMahon, the state’s annual shortfalls will be nearly $5 billion; multibillion-dollar budget gaps also loom for the city as far as the eye can see. Meanwhile, state comptroller Alan Hevesi has sounded the alarm about the state’s mounting debt, which has climbed to $49 billion from just $14.4 billion five years ago (and that doesn’t include another $70 billion in public authority red ink).

Where could the CFE billions possibly come from? In February, the executive vice president of the state teachers’ union, Alan Lubin, offered a suggestion: hike taxes on folks making over $100,000. “They can afford it and they probably wouldn’t mind it,” Lubin arrogantly opined. A great plan—if the goal is to turn current New Yorkers into former New Yorkers, accelerating a trend that has seen New York fall to 49th in state population growth as residents flee to less heavily taxed locales. In another recent study, McMahon estimated that to give the CFE everything it seeks would require a 20 percent increase across the state’s entire general fund tax base. “It would be the straw that broke the camel’s back with regard to New York State’s fiscal situation,” warns McMahon. Even some Democrats are fretting. After DeGrasse’s latest ruling, Long Island state assemblywoman Ginny Fields complained, “I don’t know where we’re going to find it without raising taxes . . . and they’ve already taxed everybody to the point where it is very hard to live on Long Island. We’ve already raised every single license, every fee.”

The political impediments to the CFE are equally daunting. DeGrasse’s ruling suggested that the city and state would have to share the financial burden of the court-ordered increase. But the Bloomberg administration refuses to have city taxes pay any part of the bill. “If we have to pay any portion of this, no thanks,” the city’s corporation counsel, Michael Cardozo, told DeGrasse in January. (New York City taxpayers, of course, fund 40 percent of the state budget. So, in effect, 40 cents of any dollar in increased state aid would come from city taxpayers’ pockets anyway.)

The city’s intransigence has hardened already hard upstate opposition. As the chief counsel to a New York state senator notes, “The idea that legislators from Albany, Buffalo, Syracuse, Rochester—all cities that face similar urban education problems as New York City—are going to vote to authorize spending billions of their constituents’ tax dollars to fix New York’s schools is nuts. You might as well take DeGrasse’s figure [$5.63 billion] and double it, because everyone in the legislature is going to want a piece of the pie.” Since the state constitution requires a two-thirds majority in the state legislature to pass any bill that appropriates general state monies “for local purposes,” any politically viable fiscal equity legislation would have to boost education spending across the state.

Recognizing this, CFE supporters have drafted a statewide “Schools for New York’s Future Act” that seeks to “enact aspects of Justice DeGrasse’s decision and apply them not only to children of New York City but to all underfunded school districts throughout the state.” Under this scheme, the new statewide total increase in education funding over the next four years, including New York City’s portion, amounts to $8.6 billion extra a year in operating funding and $10 billion in capital spending—eye-popping sums that make the CFE even more detached from reality. Perhaps realizing that it has opened a Pandora’s box, the court of appeals recently ruled against another educational-adequacy lawsuit, brought by a group representing 27 low-performing schools outside New York City.

Last, the CFE suit runs into a separation-of-powers obstacle. The state constitution stipulates: “No money shall ever be paid out of State treasury funds under its management, except in pursuance of an appropriation by law”—that is, the courts have no authority to order the spending of public money. And a consolidated decision handed down by the court of appeals last December in the related cases, Pataki v. New York State Assembly and Silver v. Pataki, clarifies that the constitution gives the governor the lead role in crafting the state budget. These cases concerned the degree to which the legislature could alter appropriations bills, and the decision reconfirmed the governor’s extraordinary power of the purse.

Here’s how the budget process should work, says the court of appeals: “If the Legislature disagrees with the Governor’s spending proposals, it is free . . . to reduce or eliminate them; it is also free to refuse to act on the Governor’s proposed legislation at all, thus forcing him to negotiate. But it cannot adopt a budget that substitutes its spending proposals for the Governor’s.” The court adds that the budget “must be based on the Governor’s judgment not only on how much money to spend, but on which specific expenditures are prudent, and what preconditions should be imposed on them.” (Assembly Speaker Sheldon Silver and Senate Majority Leader Joe Bruno are seeking to circumvent the ruling by putting a referendum on the November ballot that would amend the constitution to give the legislature greater budgetary authority if the state budget is not approved on time, a reform that would guarantee late budgets, higher spending, and higher taxes.)

The court of appeals has handed Governor Pataki a great weapon in the long-running CFE saga. How should he use it? One thing is clear: he should do everything he can to stop New York from traveling down the futile court-directed education-financing path that other states have followed. To date, the top courts in over half the states in the nation have declared urban schools in those states “inequitable” or “inadequate.” But instead of giving poor minority kids an immediate remedy, such as a voucher, enabling them to take advantage of some of the same educational options that wealthier children enjoy, courts have ordered up boatloads more money to pour into dysfunctional urban systems. (Michael Rebell, the attorney who first launched the CFE and has since served as its co-counsel and executive director, has just announced that he will be joining Columbia Teachers College this fall to start a Campaign for Educational Equity, funded initially with $12 million, to export the CFE model—that is, getting courts to order more money for the teachers’ unions—to still more states.)

New Yorkers need only look across the Hudson River to see the folly of this approach. New Jersey was a pioneer in the educational equity movement. Three decades of litigation have pushed the courts deeper and deeper into education-policy decision making, resulting in huge court-mandated increases in per-pupil spending, paid for with massive state and property tax hikes. Yet the targeted urban districts have seen little in the way of improved education results. Meanwhile, the tax increases have spurred a tax revolt among fed-up voters across the state.

Governor Pataki (and his successor) must not allow this to happen to New York. Instead, he should use his newly affirmed constitutional authority and tell the courts to stay out of education policy, especially when it comes to the spending decisions that are the responsibility of elected representatives. Pataki should shift the conversation away from the tired refrain of “more money” and toward measures that will actually help open New York’s ossified educational system to competition and real reform. He has already proposed a key step (though without legislative approval, so far): lifting the teachers’ union–imposed statewide cap on charter schools—several are now among the city’s top-performing and have waiting lists in the thousands. A modest tax credit for poor and working-class parents who choose to send their children to parochial or private schools would also be a worthy goal. Most important, Pataki should support Mayor Bloomberg’s and Schools Chancellor Klein’s efforts to hammer out a new contract for city teachers that requires more classroom time and greater staffing flexibility, makes it easier to fire bad teachers and reward exceptional ones, and generally seeks to treat teachers as professionals rather than union cogs.

If Governor Pataki hangs tough and insists on these commonsense reforms, he could help usher in a new era of improved educational options for New York City’s kids—which is what this whole circus was supposed to be about in the first place.


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