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Analysis of Executive Budget Proposal to Curtail State Aid for School Construction

Wednesday, February 20, 2019  

This research brief analyzes the 2019-20 Executive Budget’s proposal for a new tier of State Building Aid beginning in 2020-21 that would curtail state aid for school construction. ASBO’s analysis uses data for 2019-20 and presents the hypothetical impact on school districts over time, which shows that low need school districts, the New York City school district and average need school districts would be most affected.

Background

Through state Building Aid, New York shares in the capital costs of building public school infrastructure. The state uses a Building Aid ratio that computes a state share by comparing property wealth in a school district to the statewide average to determine its relative share of costs. Current state shares range from a minimum of 10 percent to a maximum of 98 percent. While Building Aid is paid out over as much as 30 years, the rules that were in place when a project was approved and undertaken generally apply for the duration of the aid.

For current projects, school district aid ratios are the most favorable of their current aid ratio formula plus an incentive of ten percentage points or the aid ratio for any year going back to the 1981-82 school year, whichever is more favorable. School districts that were classified as high-need in 2003 receive an additional increase.

Estimated Impact of Proposed Changes

Under the Governor’s proposed changes for school year 2020-21 and beyond, the minimum Building Aid state share would be reduced from ten percent to five percent. Districts would no longer be able to select previous Building Aid ratios. Instead, they would use their current year calculation with a single addition: ten percentage points for districts classified as high-need in 2008 and, for all other districts, ten percent multiplied by their state share.

Because Building Aid is determined under the laws in effect at the time the Commissioner of Education approves the project, in a given year a school district might receive aid for projects covered under several different aid rules. This makes it difficult to precisely quantify the immediate impact of the Governor’s proposal since it will only apply to projects approved after July 1, 2019. In order to assess the likely impact of the Executive proposal for 2020-21 aid and beyond, we use data from previous years.

Figure 1 compares groups of school districts by the state share currently in effect (blue) and proposed (orange) state shares. As the chart shows, the Governor’s proposal would lead to much less favorable state shares for school districts. Most districts would experience small, but impactful, changes; for 58 percent of districts, the state share decrease would be five percentage points or less. For ten percent of districts, the decrease in state share would be 20 percentage points or more, with some districts experiencing even more dramatic reductions. For example, using data for 2019-20 shows that 10 districts would eventually experience declines in the state share of school construction costs of between 45 and 67 percent if the Governor’s proposal were in effect.

Figure 1. Executive Proposal: Aid ratios will be less, especially for the lowest and highest wealth school districts.

To better understand the magnitude of how changing state shares would affect individual districts, we can look at the Building Aid each district receives in the 2019-20 Executive Budget and how the Building Aid ratio used under current law compares with the Governor’s proposed changes. Although 2019-20 Building Aid is for actual district spending on projects begun and completed under different rule calculations, the comparisons can approximate how drastic this change will be for different types of school districts. If each district’s 2019-20 Building Aid were based on the district’s aid ratio under current laws and then recalculated using the proposed changes[1], Building Aid statewide would decrease nine percent, from $3.2 billion to $2.9 billion.

Figure 2 shows the regional impact these changes would eventually have if all projects were subject to the new rules. New York City would see its Building Aid decrease by $135 million, and Long Island and the Hudson Valley would see the largest percentage decreases in Building Aid.

Figure 2. Hypothetical Regional Impact of Proposed Changes to Building Aid is Widespread

Region

2019-20 Building Aid in Executive Budget

Estimated 2019-20 aid with new methods

Difference

Percent Difference

Statewide

$3,207,182,052

$2,916,813,633

$290,368,419

-9%

Capital District

$169,901,483

$153,225,747

$16,675,736

-10%

Central New York

$151,469,654

$144,428,148

$7,041,506

-5%

Finger Lakes

$269,073,365

$257,007,180

$12,066,185

-4%

Hudson Valley

$229,885,397

$198,299,734

$31,585,663

-14%

Long Island

$306,167,981

$260,314,403

$45,853,578

-15%

Mohawk Valley

$112,799,022

$107,780,443

$5,018,579

-4%

New York City

$1,352,284,920

$1,216,818,768

$135,466,152

-10%

North Country

$95,611,374

$85,691,854

$9,919,520

-10%

Southern Tier

$175,451,275

$163,419,075

$12,032,200

-7%

Western Region

$344,537,581

$329,828,281

$14,709,300

-4%


Figure 3 shows the eventual impact for school districts by need/resource capacity category, using data for 2019-20. Proportionately, low-need school districts would be the most impacted, but school districts in all categories would experience some reduction in Building Aid, especially New York City and average need school districts.

Figure 3. Hypothetical impact of proposed changes to Building Aid affects low-need school districts, New York City and average need school districts the most.

Region

19-20 Building Aid

Estimated 19-20 aid with new methods

Difference

Percent
Difference

New York City

$1,352,284,920

$1,216,818,768

$135,466,152

-10%

Big Four

$242,304,149

$239,001,889

$3,302,260

-1%

High-Need Urban/
Suburban

$267,261,183

$258,659,456

$8,601,727

-3%

High-Need Rural

$305,374,927

$285,591,403

$19,783,524

-6%

Average-Need

$809,408,688

$734,082,879

$75,325,809

-9%

Low-Need

$230,548,185

$182,659,237

$47,888,948

-21%


ASBO Commentary 
     
While the Governor’s proposed changes to Building Aid would lower state spending, the Executive Budget does nothing to address the reason state Building Aid is growing in the first place. Rather than helping school districts cut costs and save time on construction projects, the Governor’s proposal will keep costs spiraling and leave it to local taxpayers to foot the bill. ASBO New York recommends the State examine ways school districts can cut school construction costs, thus reducing the level and need for Building Aid. For example, the State can reexamine the Wicks Law and either allow school districts to opt out of it or increase the statewide exemption thresholds that were put in place in 2008. ASBO New York also recommends that the threshold for capital outlay projects be increased from $100,000 to $250,000. These are projects that districts pay for in full and receive full aid in the following year, thus avoiding the assumed amortization process required for larger projects. This allows school districts to reduce interest costs.

 


 

[1] Proposed changes include a reduction of the minimum aid ratio from ten percent to five percent, elimination of the selected aid ratio going back to 1981-82 and revising the ten percent building aid incentive as ten percent for high need school districts and ten percent multiplied by the Building Aid Ratio for all others.