At the Newburgh Enlarged City School District in Orange County, the high school arts program has been threatened each year by budget crunches. At Rondout Valley in nearby Ulster County, field trips have been scaled back, and classrooms may be slightly colder next year in an effort to keep heating costs down. The Hyde Park School District in Dutchess County already has cut its enrichment programs and now is looking to scale back classes like home and career skills to avoid a major tax increase.

 By contrast, Blind Brook-Rye Union Free School District in Westchester County continues to offer elective classes such as conversational Italian. Students in the Warwick Valley Central School District in Orange County have access to an in-school television production studio. The Tuxedo Union Free School District, also in Orange County, has reached its goal of a high-tech computer in every elementary school classroom.

 Public schools in New York vary widely in spending—suburban Tuxedo spent $14,500 per pupil on its 534 students in the 1994-95 school year, while inner-city Newburgh spent $7,700 per pupil on its 11,228 students, according to the state Education Department (SED) due largely to a complex education funding equation of local, state and federal dollars that most people agree doesn't add up.

 But even with such blatant disparities among the state's 711 school districts, lawmakers for decades have been unable to agree on how to reform school finances. This year is no different. Since this fall, state officials have been outlining proposals on how to bring education funding back into balance this session.

 Proposals range from minor tinkering, such as stepping up real property tax assessment standards, to major overhauls, such as replacing the property tax, which counts for as much as 65 percent of districts' education spending, with increased income or sales tax revenues.

 For legislative leaders and the governor, the major focus this session is reducing local school property taxes, which total $15 billion for the current academic year. The state's share of education funding this year is $10.2 billion, and federal spending is $ 1 billion.

 Senate Majority Leader Joseph Bruno, a Republican from upstate Brunswick, has said property tax relief is his "number one priority," and he plans to introduce a bill that would increase by as much as 3 percent state aid to schools choosing to freeze or lower their property tax levies. The $1.1 billion, multiyear package, which passed the Senate last year but was ignored in the Democratcontrolled Assembly, also includes an expanded school property tax credit program for low- and middle-income homeowners and senior citizens.

 Gov. George Pataki also announced a plan to cut homeowners' school taxes by an average of 27 percent. The School Tax Relief plan (STAR) would be phased in over four years and ultimately would amount to $1.7 billion a year in savings to taxpayers. Pataki has said the state would make up the difference to schools through the General Fund, including, by the fourth year, $680 million annually to New York City schools to reflect enrollment increases and $385 million to help equalize disparities between schools. Pataki added that senior citizens—who live on fixed incomes—over time will see their school property taxes reduced by 45 percent.

 The governor also proposes increasing school aid for the 1997-98 school year by $302 million, as well as doubling $21 million in targeted textbook aid and tripling the $10.5 million the state gives local schools to buy computers by 2001-02. In an effort to "provide new opportunities for children trapped in failing and underperforming schools," Pataki's budget plan calls for allowing anyone from groups of teachers to state officials to establish charter schools that are exempt from state requirements, including one mandating that teachers be certified by the state.

 Details are still sketchy on how to pay for the state aid increases. Both Pataki and Bruno have talked of directing state Lottery revenues to property tax relief. And Pataki says the state can finance the tax cut with savings it has achieved through economic growth and controlling spending, despite an estimated $2.3 billion structural deficit lawmakers must close in this year's budget. "Schools choosing to freeze or reduce property taxes would be prioritized with state funds that would be allocated for them," Bruno says. "We can use Lottery money and direct it directly into state aid to reduce the burden on local taxpayers."

 But critics of the Republicans' plans question how the state will pay for any of the initiatives, particularly with another round of multimillion-dollar personal income tax cuts this year. Also, by constitutional requirement, the state already funnels its net Lottery revenues—after paying its administrative fees and prizes to winners—to schools, an amount that totaled $1.5 billion this year. Many educators fear that aid could be reduced if money were to go to property tax relief instead. And although poor districts' tax rates generally are higher than their wealthy counterparts', they generate little local money for education because their tax bases are so poor. For example, Newburgh in 1994-95 taxed at an average $16.60 per assessed $1,000, with $166,464 in taxable property for each of its students; that same year, Tuxedo's tax rate was $8 per assessed $1,000 with $1,507,624 in taxable property per pupil. It thus would be more difficult for poor districts to hold the line on local tax levies and qualify for the increased state aid under Bruno's plan, critics say.

 One of those critics, Assembly Speaker Sheldon Silver, a Manhattan Democrat, says he favors a proposal that would require schools to cap their property tax levies at no more than the annual rate of inflation, roughly 3 percent, but only if the state maintains the level of education aid set forth in the previous year's budget. Because taxes could increase with the cost of living, Silver says more schools would be able to meet the requirements of his plan, which passed the Assembly in 1995 but never was introduced in the Senate.

 Both Bruno and Silver have said they would consider a conference committee to address the differences in their proposals. "I am open to discussion because our objectives are to cut taxes in the most meaningful ways," Bruno says.

 "I am not ready to balance the budget on the backs of the children," Silver says. "I can go for a reduction [in property taxes], but only if I know a student won't have one less textbook as a result, or that a classroom won't have to grow to 40 students as a result."

 Other education funding proposals this year include a perennial one from Republican Sen. Charles Cook of upstate Delhi, chairman of the Senate Education Committee, that would guarantee an annual aid increase of about $600 million, of which half would be used for property tax reduction. The bill hasn't reached the Senate floor since it passed three years ago, and Cook concedes, "The problem with my proposal is ... that you are going to commit for the indefinite future a $600 million increase in aid to education.... Six hundred million dollars is a lot of money."

 Republican Assembly members Nancy Calhoun of Blooming Grove, in Orange County, and Chris Ortloff of upstate Plattsburgh also are hammering out a blueprint to replace the school property tax with either an income or sales tax levy, but only for schools outside of New York City. State Comptroller H. Carl McCall proposed in an October 1996 report on education finance combining categories of state aid targeted at specific needs into block grants to give districts the flexibility to spend state money where they need it most. He also proposed accounting for regional cost differences in aid grants, among other issues.

 The state Board of Regents, charged with setting education policy, has proposed reforming special education finance—which accounted for $3.6 billion of school spending in 1995-96. Schools currently receive more money for placing students in special education and teaching them in more costly settings, but the board proposes increasing funding for general education and allowing districts to determine how much of that should go to special education. The Regents also recommend allocating $5 billion over five years to pay for school building renovations and repairs.

 Still, many question whether attempts at substantive education funding reform will be overshadowed by bitter state budget battles. For the 1996-97 school year the Regents proposed a $ 10 billion state aid package—a $360 million increaseover the previous year. Pataki in his executive budget froze aid at the 1995-96 level of $9 billion, and it took months of squabbling for the Legislature to add back about $200 million, less than the cost-of-living increase for that year.

 Pataki's proposed $302 million in additional state money for next year is in line with the Regents' proposed $306 million increase, of which $100 million would go to literacy and reading. But Regents Chancellor Carl Hayden says even his own board's proposal may not be enough to meet cost-of-living increases, inflation and an expected 30,000 growth spurt in enrollment next year.

 Hayden says he is "encouraged" by Pataki's proposals if the state will infuse education with more money rather than shift dollars around. However, substantially changing education finance "would require a vastly different level of funding and a reversal of a 30-year decline of the state share," he says. "I think the governor understands that, and I expect he will very soon increase the commitment."

 Others are not so sure. "People talk about making changes every year," says Assemblyman Steven Sanders, a Manhattan Democrat and chairman of the Assembly Education Committee, who has proposed increasing the state's share of education spending to 50 percent. "But then we have to struggle for three months just to restore money that the governor cut out of education funding."

 Charles Winters, assistant superintendent for finance at Newburgh, says school funding disparities have become too ingrained and too accepted by politicians for any real change to occur. There's "almost an admission that a Newburgh can't compete with a Monroe-Woodbury," says Winters, referring to a more affluent Orange County school district. "It's an admission that [state officials] can't afford to level up funding to poor districts and don't have the courage to level down [funding to wealthy districts]."

 Public money has been spent on education in New York since the 1630s, when the Dutch began establishing schools in New York City. The first direct aid grant to schools totaled $50,000 over five years beginning in 1795. Distribution was made to counties based on their representation in the Legislature, to towns based on the number of taxable residents, and to school districts based on attendance. Towns receiving aid were required to raise half the amount of money apportioned by the state through taxes, according to a 1993 SED report "Development of State Support of Education in New York State."

 By 1925, state aid to schools had reached $41 million but represented only 14 percent of total education spending. The state aid formula at the time was comprised of 25 quotas that distributed money for each academic department a school had, the numbers of teachers it employed, and whether it had a nurse or physical education teacher. But, the SED report states, rural one-room school houses did not have the resources to employ enough teachers or offer enough programs in order to receive increased state funding, and those students quickly began to fall behind their counterparts in the villages and cities.

 Lawmakers addressed the issue with the Cole-Rice Act of 1925, which attempted to equalize education funding by offering more state money to rural schools with fewer resources for teacher training, buildings and transportation. Quotas continued to be added each year in an effort to funnel money to the most needy schools, but calls for a long-term solution to funding inequities continued.

 In 1963, a joint legislative task force called the Diefendorf Committee proposed that the state share of education spending increase to 50 percent from its level of 44 percent at the time. It also called for a new state aid formula providing a flat grant to even the wealthiest districts to fund daily operations, as well as additional equalization aid in inverse proportion to each district's ability to raise local revenues. Its basic foundations, including aid categories compensating for enrollment growth and students with learning disabilities, still exist.

 The state's share of education also began to increase after the Diefendorf report, reaching its peak in 1968-69 at 48.1 percent, but then declined steadily to its current share of 37 percent. The 1963 document marked the last time a task force's recommendations resultedin comprehensive reform, according to McCall's school finance reform report.

 Tinkering with the state formula over the years has yielded a complex patch work of more than 40 categories of aid laced with hundreds of acronyms. Where state aid historically was figured by hand, the current formula's pages and pages of calculations can be performed only by computer. Funding for large and small city school districts is even more complex because it is tied to budgets established by local city councils.

 According to SED's 1996 "State Aid to Schools: A Primer," designed to helpschool officials wade through the state aid morass, major categories include:
 
 

• Operating aid. The largest amount, covering 53 percent of state funds to allschools and totaling $5.4 billion in 1996-97, operating aid is based on districts' wealth and includes money for teachers' salaries and benefits, daily functions, maintenance and administration costs.

 

 
 
 
 
 
 
 

• Growth aid. Some $68 million was doled out this year to 374 districts that had enrollment increases.
• Extraordinary needs aid. About $465 million was targeted for schools with high concentrations of students living in poverty who qualify for free school lunch programs, students with limited English skills, and students in sparsely populated school districts.
• Aid for students with disabilities. Schools received $1.4 billion in public and private excess cost aid to educate students with disabilities either within regular classrooms or at private facilities geared toward special needs. Schoolsalso received $40 million for education related support services to help students with disabilities learn in regular class room settings.
• Tax aid. About $345 million in tax equalization aid to 137 districts and $142 million in tax effort aid to 237 districts was granted to less wealthy regions with large local tax efforts because of high costs of living.
• Building and transportation aid. Schools were reimbursed $1.3 billion for renovations, additions and repairs, and school bus purchases.
• BOCES aid. Schools received $335 million for sending their students to regional Boards of Cooperative Educational Services (BOCES) learning centers that provide, among other things, alternative classrooms, support services and vocational education to students.

 Critics of the current state funding system—including SED officials, legislative leaders, the comptroller and education organizations such as New York State United Teachers (NYSUT), the New York State School Boards Association (NYSSBA) and the Conference of Big Five School Districts—have described the state aid formula as everything from inefficient to inoperable to inequitable.

 Because of equalization, the poorest schools received $4,732 in state aid for 1994-95 and the wealthiest received $998, according to SED's state aid primer. Still, the poorest districts spent only $6,462 per pupil that year compared with $12,209 spent by wealthy districts. The discrepancy arises each year because poor districts, although their tax rates generally are higher than those of wealthy districts, generate only an eighth of the local revenues of their richer counterparts.

 State funding also is problematic for disadvantaged school districts, especially those in the inner city, says Norman McConney, chief of staff for Assemblyman Arthur Eve, a Buffalo Democrat and deputy speaker of the Assembly. The current formula does not allow the state to funnel aid directly to poor districts without raising aid to wealthy districts. "Then you've got to give more money to the wealthy districts too, so they keep getting richer," McConney says.

 While many speak of disadvantaged students in terms of inner city schools and racial minorities, of the state's 65 high-poverty school districts—in which at least 20 percent of school-age children live below the poverty line—31 were rural schools that primarily serve white children, according to SED's "1996 Statewide Profile of the Educational System."

 Regardless of race, it is the interests of the disadvantaged that are least likely to be addressed, says Fred Dembowski, a State University of New York education professor. Theoretically, he says, it is easy to devise a system providing equal educational opportunities and resources to all schools. Under such a model, the state would assume l00 percent of funding, apportioning an equal amount of money per pupil to schools.

 While poor districts' financial burdens may be eased under a property-tax-free system, wealthy schools no longer would have the luxury of providing enhanced educational opportunities to their students, Dembowski says. "The problem lies in the political aspect of getting such a model into law," he says. "With school finance reform, the bottom line is a redistribution of wealth, and the wealthy just won't have it. People in the rich districts have the money, they hire the lobbyists, so the system stays the same."

 Whether unequal funding among districts is an inherent defect in the state aid formula is still being debated. In 1982, the state Court of Appeals reversed a lower court ruling that had found the school financing system unconstitutional because it was inequitable. Although the higher court ruled in the Levittown case that school equity was a legislative decision, not a constitutional mandate, the Campaign for Fiscal Equity in New York City is challenging education finance in a lawsuit that claims funding disparities between schools are exacerbated by the greater needs of urban schools due to large numbers of homeless people and immigrants, as well as general poverty. The case is pending before the state Court of Appeals.

 Others, like Dan Kinley, NYSSBA's deputy executive director, say the basic funding formula itself is sound, but the caps and clauses added to it over the years are preventing it from running properly. For example, most aid formulas are tied to a "save-harmless" clause, meaning schools cannot receive fewer state aid dollars than they did the previous year. While that clause is essential for many poor districts struggling to maintain their funding, schools with drops in enrollment or in the number of students with disabilities end up receiving more aid than they need. It also makes it difficult to take funds from wealthy schools, a practice McCall calls "Robin Hood" reform.

 According to SED, only 29 school districts are considered "on formula," meaning they receive the amount of money the state aid formula prescribes. The rest are affected by an adjustable transition cap instituted in 1993. Concerned that schools were not meeting the academic needs of poor and at-risk children, state officials updated formulas for limited English proficiency, gifted and talented, hardware and technology, tax equalization and effort, and operating aid.

 But the state could not afford the $500 million increase generated by tinkering with the formulas, so funds to schools were capped. This year, schools were limited to either a 1.52 increase in total state funding over the previous year or to a l0.9 percent hike in the formulas affected by the cap, whichever was greater. As a result, in 1996-97, 360 school districts received an additional $146 million and 297 districts lost $472 million that they otherwise would have been entitled to under the straight state aid formula. And in some cases, local tax rates increased by double digits to make up the difference.

 Alan Lubin, NYSUT's executive vice president, says schools would receive at least $500 million in additional funds simply by removing the cap. That money would be welcomed by struggling school districts like Syracuse, which lost $5 million in aid this year because of the cap, and New York City, which lost $62 million.

 At the very least, critics say, apart from the complexity of the calculations, some elements of the current funding formula just don't make sense. For example, according to the comptroller's report, tax effort aid for the 1994-95 school year was calculated as '$912.48 multiplied by the tax effort percent—[meaning] the positive result of the 1993 residential property tax levy divided by the 1994 adjusted gross income (but no greater than seven)—minus three and then divided by four." The comptroller says that using the data on residential property taxes and income to determine aid makes sense, but "the remainder of the calculation really has no explanation." In fact, the $912.48 amount "is completely meaningless, other than that it probably produced a desired distribution in the year of enactment," he says.

 According to Benita Stambler of SED's State Aid Office, many of the funding formulas don't make sense when broken into their components. "The formulas are devised backwards," she says. "[Lawmakers] decide how much money they want to give out and then create a formula."

 While criticism of the current school finance system is as extensive as the number of calculations used to derive the distribution of state money to education, some measures have received applause. A bill signed into law last year that is expected to reduce farmers' property taxes 25 percent by 1998 received educators' support because the state has committed increased aid to make up the difference to schools.

 NYSUT's Lubin says he's pleased to see that the governor's $ I .75 billion environmental quality bond act includes money to convert the state's 300 coal-burning schools to gas heat and electric. Initiatives like New York Wired, a state organized program in which private businesses and volunteers took the first steps toward hooking 3,100 schools up to the Internet, also are welcome. And state Education Commissioner Richard Mills says he's pleased to see the governor's interest in investing money into computers and textbooks for the schools.

 Yet New York continues to lag behind when it comes to substantive reform. After the 1963 Diefendorf report, the Board of Regents and Legislature commissioned four major studies on school equity. Though many of these reports are still quoted today by education funding reformists, the majority of their recommendations never were implemented. For example, the 1988 Salerno Commission report "Funding for Fairness" is credited with sparking some of the changes to state aid that increased money to at-risk and disadvantaged students, but recommendations such as accounting for regional cost differences in state aid formulas went unheeded. The 1973 Fleischmann report on "The Quality, Cost and Financing of Elementary and Secondary Education in New York State" proposed that schools be fully funded by the state, a recommendation, according to McCall, that "had a life of only 72 hours."

 While New York has struggled to make any headway, 16 states enacted property tax relief legislation that increased state funding during their 1995 and 1996 sessions, according to Terry Whitney, a senior policy specialist with the National Coalition of State Legislatures. Other states, instead of capping aid to schools as New York did in 1993, have limited the number of local aid options for which wealthy schools are eligible. It took Michigan voters only a year to propose and pass a package in 1994 that began to replace the local property tax levy as a means of education funding with a 2 percent increase in state sales taxes.

 While property taxes throughout New York are exorbitant, many are leery of recent proposals in the state to reform education funding, particularly because they do not address where the money will come from.

 Rondout Valley Superintendent David Giles says property taxes in his mid-Hudson district have increased by 30 percent in the past three years just to meet budget expenses related to an increase of 100 students in the last five years. His district is looking to hold its $31 million budget to a 1.5 percent increase in 1997-98 in order to cover a 3 percent increase in already negotiated teachers salaries and rising costs in utilities. Without a substantial state aid hike, he says, the district would be hard pressed to cut taxes and continue to meet its basic obligations. "I'm somewhat worried that [the governor's plan] is more of a shift in existing funds rather than new funds, and we can't afford that," he says.

 A more effective reform, Giles says, would be to establish state aid in three to five-year blocks so that districts can better plot their spending. "It's very hard to plan multiyear contracts and spending when aid comes in yearly chunks," he says.

 Superintendent John Yagielski of the Shenendehowa School District in Saratoga County says his district held the line on taxes in its 1996-97 $73.8 million budget after voters rejected a 1.9 percent increase in the tax rate the year before. Still, property taxes make up 66 percent of Shenendehowa's budget, compared to a 37 percent share 15 years ago. "It's not comfortable [that] local school boards and superintendents ... are in such a position of reliance on the local property taxpayer," he says. "It would be better to try to create some mechanism for much greater state support. That would take care of increases in proper taxes."

 But Cook says increasing the state share to some target number is useless talk. Rather, reform should channel money directly to where it is needed. "Otherwise the 40 percent [state share] becomes a moving target," he says. "We increase state aid and then local expenditures go up by the same proportion. We need to require districts to hold their spending increases in line with the increases in state aid they receive. "

 Others have taken a wait-and-see attitude about the proposals outlined by Pataki, Bruno and Silver, though few believe these reforms would help balance inequities in education funding. Even proposals such as Calhoun's to eradicate the property tax entirely as a means of education funding have been cast in terms of helping taxpayers, not ending inequity between poor and wealthy districts. "The districts that are spending a lot of money [on students] are in a better position to freeze the tax rate," says Frank Mauro of the labor-backed Fiscal Policy Institute. "The poor districts don't have enough money to spend per pupil now. How can they freeze taxes?"

 Comptroller McCall writes in his report that the basic system of local funding through property taxes supplemented by equalized state aid works. While state aid formulas may need to be overhauled, "we cannot eliminate the property tax," he says, because it is the foundation of education. Rather, if "targeted relief [is provided] to those most adversely affected by its regressive nature," he says, the property tax/state aid system would be "a method of funding we can live with."

 Giles says the current state aid formula has become too unwieldy. "The current formula is patched to the point where it will collapse," he says.

 Mauro agrees, adding that the answer to equity instead lies in both overhauling the state aid formula and increasing the state share of education spending. "Our school aid formula is too complicated," he says. "It tries to accomplish too much. We need to start over."

 The current tax reform proposals, he says, "are just superficial magic bullets."

 Amy Terdiman is associate editor of Empire State Report.