News and Speeches

Chancellor's Testimony Before City Council Education Committee on DOE's Preliminary Expense Budget



Good morning, Chairman Jackson and members of the Committee on Education. Thank you for giving me this opportunity to testify. I am joined by my chief operating officer, Photeine Anagnostopoulos.

Today, I will discuss our operating budget for the 2009-10 school year. Before I do, I’d like to say a quick word about our students’ academic progress. I’m pleased to report that many more of our students are meeting and exceeding standards in math and reading, we are closing the racial and ethnic achievement gaps that have long bedeviled our school system, and our graduation rate is the highest it’s been in decades. Just last week, the Mayor and I met with Chancellor Goldstein of City University of New York to announce that the number of New York City public school graduates attending CUNY schools is up by about 50%, from approximately 16,000 to 24,000, between 2002 and 2008. More than 70% of those additional 8,000 graduates were Latino or African American. That is real progress and I commend our principals, assistant principals, teachers, staff, students, and families who, together, are dramatically changing educational outcomes in our City.

This year, as you know, we are facing unprecedented economic challenges. We are all very thankful to President Obama and Congress for passing a federal stimulus package that will mitigate the hardship in New York City public schools and school districts across the country—but the Federal money isn’t enough to spare schools from all suffering.

We are still working with the State to determine how exactly this year’s budget will affect our schools, so I cannot tell you for sure how much money each school will have next year. I do know for sure, though, that no matter how expected Federal, State, and City dollars are distributed to schools, our schools will have less money than they had this school year, while, at the same time, fixed costs for things like teacher salaries and special education are on the rise.

What does this mean for schools? It means our schools will have to make hard choices—choices we wish they did not have to make—and do more with less, or, in many cases, forgo some programs. This is unfortunate.

What does this mean for members of the City Council and the other people who represent New Yorkers in government? In these hard times, we must do everything in our power to protect our schools and keep our country’s financial crisis from turning into a crisis in our classrooms. To that end, I know you want to work together this year as partners on behalf of our kids. I will urge you today to do everything in your power to convince our colleagues in Albany to send as much money as possible to support education in New York City and to give us the flexibility to put the money where it’s needed the most.


For the current school year (FY2009), the public schools had a total budget of $21 billion. About 50% of this amount came from the City, about 40% came from the State, and about 10% came from the federal government.

With the severe decline in the economy, we were expecting a budget shortfall of $1.4 billion before the federal stimulus package came through. For school year 2009-2010, this includes a $700 million reduction from Albany on top of a $500 million reduction from the City and cost increases for things like teachers’ salaries and mandated special education services. We’re now counting on receiving significant funds from the federal government’s American Recovery and Reinvestment Act, which should greatly reduce this budget gap. The stimulus package will give us additional Title I and IDEA funds for students with disabilities. These funds total more than $400 million for each of the next two years. Depending on how the Governor and Legislature allocate the Stabilization Funds distributed to New York State, the City could also receive upwards of $500 million in Federal stabilization funds in each of the next two years. For FY10, this would bring our budget gap to about $500 million. However, our budget gap could reach nearly $650 million if New York City receives less than its fair share of the Stabilization Funds from Albany.

Let me reiterate: there are still many unknown variables. But let’s take a closer look at where we are, based on the information we have today.

We know the Governor and Mayor’s preliminary budget estimates, and we know generally how much money is going to Albany from the federal government. But we don’t know if Albany will give us our fair share of the federal stimulus funds, we don’t know how the State will choose to restrict or loosen its restrictions on how we can spend our money, and we don’t know if there will be any shifting in the budget numbers as we approach the start of the fiscal year. Plus, the U.S. Department of Education has not yet issued final guidelines for states and school districts that clarify how the money in the stimulus package can be allocated and distributed over time. This is, in short, a time of real uncertainty and we are trying to give schools and our community as much clarity as possible despite the questions we are still trying to answer.

In the past four rounds of cuts, we have done all we could to minimize budget cuts to the schools, extracting as much in savings as possible out of our administrative, nonschool spending. Why? Because I want our dollars as close as possible to students where they can have a direct impact on student learning. Since mid-FY2008, when the first of the 4 budget cuts was implemented, Central and Field budgets have been reduced by twice their share of the reducible budget while school budgets have been reduced by half their share. For the FY09 cuts alone, we cut Central and Field budgets by 6% while reducing our school budgets by only 1%. The FY09 reduction includes the elimination of 475 administrative positions—which represents an 8% reduction in overall administrative headcount.

Today, central and field costs represent only 3% of our total budget, and, as we move forward, it’s important to remember that what we do is critically important to our schools. Keeping payroll and HR up and running and our technology systems functioning is critical to schools’ operations. And without a sound accountability system that provides schools, teachers, and families with the information they need, we will seriously undermine our schools’ ability to operate and succeed.

Today, as we prepare to cut back more, we have no choice but to reduce the numbers of dollars sent to our schools.

The decisions we must make are even more difficult because nearly half of our $21 billion budget cannot be reduced. That’s because we have many fixed costs like pensions, debt service, special education mandates, energy, and leases. As a result, we have $11 billion available for reductions. So, we must find $500 million or more in savings from a pot of $11 billion, not $21 billion. And, of that $11 million, almost 90% goes to teachers and other staff covered by union contracts.

We don’t know how the necessary reduction will affect schools. This uncertainty is due to two issues:

  • First, as I said before, we don’t know how much money we’re going to get in all.
  • Second, we don’t know how many restrictions will be placed on the dollars we do receive.

If we receive about $500 million in state stabilization funds—which is our “share” in the existing State formula—the average cut to schools will be 6%. But depending on restrictions, some schools could see their budgets rise while others could see a cut of 13%, with nearly a quarter of our schools, or 345 schools, taking a cut of greater than 8%.

Today, some in Albany are arguing that the City deserves substantially less than $500 million from the stabilization funds. One number being used is $360 million. I hope you will join me in doing everything possible to prevent this scenario, which would leave our schools with an average cut of 8%, with some schools receiving a cut of 15%. Forty five percent of schools, or 653 schools, would face a cut greater than 8%.

Our schools dedicate most of their budgets to paying for the salaries of the people who are teaching and supporting our public school children. Once in schools, 86 cents in every dollar covers salaries of teachers, principals, and other school staff. With another 6 cents covering per session and per diem compensation for educators, only 8 cents in every dollar of school-based funding pays for non-labor costs.

Schools will have to significantly reduce their non-labor spending. With cuts that could be over 30% of per session costs and non labor costs in many schools, after school programs and other enrichment and support programs will be eliminated. So, while we’ll work with schools to help them cut back in areas other than personnel, significant layoffs of school-based staff, is almost certainly going to happen under all circumstances.

Layoffs will likely include teachers as well if Albany comes in at the lower end of $362 million, with some schools having to eliminate as many as three or four teaching positions; depending on how the attrition falls out, we may still not be able to avoid a small reduction in teachers if we were to receive the $500 million in Stabilization Funds.

The severity of the impact on schools will vary widely. The variation is due to the impact of Title I. Title I dollars are required by federal law to be distributed to schools based on the number of students in poverty, characterized as those students receiving free and reduced lunch. A small number of schools receiving the largest amount of Title I dollars may actually see increases in their budgets year over year for school year 2010, while those schools that receive no Title I dollars could see cuts greater than 10%.

In preparation for the upcoming budget cuts, a little over half of our schools have planned to save, on average, about $115,000 to offset a portion of the cuts in the 2009-10 school year for a total rollover of $95 million. This reflects smart planning by those schools and I commend them for it. But even with the rollovers, most of these schools will experience significant cuts to their budgets.

Under the federal stimulus package, we’re also eligible to receive special funds from the “What Works and Innovation Fund,” We believe we’re well positioned to receive some of these dollars because the Education Secretary has said he is looking to give it to districts that have had successful reforms and can serve as models for other school districts across the United States. We can apply, for example, for money that would support our accountability work and teacher quality initiatives. Additional Federal funds will support teacher incentive programs like our schoolwide performance bonus program, which rewards teachers at schools that successfully raise students’ performance. We will be working hard to get as much of these dollars as possible to continue to motivate innovation and success in our schools.


We have been working behind the scenes, partnering with the United Federation of Teachers and others to try to get as much money as possible for our schools and make this year’s budget situation as bearable as possible for our educators, students, and families.

As you know, we should receive some clearer answers from the State in early April.

As soon as we know what to expect, we will meet with principals and then allocate budgets to schools. We know how important it is for principals to work with their teams and communities to plan for the year ahead, so we hope to give schools a sense of their budgets within the next month.


Everybody knows how difficult this year is. Tax revenues are falling. Many New Yorkers are losing their jobs. Lawmakers know that money is tight.

But I would urge you to take two steps:

First, we need to get our fair share of the Federal education funds and as much money as possible for our schools from Albany. So please work with me to secure all possible resources for our schools.

Second, we need the flexibility to spend available funds where they’re needed so that principals can allocate their remaining dollars to those programs which best improve student achievement. .

Because the State law restricts how much money schools can cut from certain restricted funding streams, principals will soon be in a position of needing to eliminate core instructional services while maintaining supplementary programs. This is not an abstract problem. It will affect real schools and real students.

Here’s an example I talked about in Albany in January. I will repeat it for you because I think it’s a powerful example of how important it is—especially in tough times—to give us as much flexibility as possible.

At IS 231 in Queens, close to 90% of Principal Emmanuel Lubin’s budget is comprised of tax levy dollars, and all but about 2% of those dollars go to paying teachers and other school employees. Mr. Lubin would have to lay off several teachers in order to have enough money to meet the budget cuts and operate. IS 231 also receives about $493,000 in State Contracts for Excellence dollars. Last year, the school used some of that money to hire a coach and mentor for his newly hired teachers. The school could actually be forced to fire some of the new teachers the mentor and coach were hired to help but, under Contracts regulations, he would have to continue to pay for the mentoring program or some other supplemental program.

This just doesn’t make sense. So, I need you to help me to convince Albany to allow us to make rational budget decisions. We owe it to our schools and our students to spend dollars where they’re needed.

Thank you for your time and attention and I welcome your questions.