Good morning, Chair Jackson and all the Members of the City Council Education Committee here today. Thank you for this opportunity to discuss Mayor Bloomberg’s proposed FY 2014 Preliminary Expense Budget as it relates to the Department of Education (DOE) and our public schools. Seated with me are Shael Suransky, our Chief Academic Officer, and Michael Tragale, our Chief Financial Officer.
Our schools and students have faced unprecedented challenges this year, beginning with Hurricane Sandy, which devastated so many of our students and families, teachers, principals and staff. Our 1,700 public schools were closed for five days, depriving students of valuable class time.
One week after the last of our schools returned to their permanent locations, our families’ lives were disrupted by a school bus strike. Not only did the strike complicate routines for families who were already struggling to balance demanding schedules, it threatened access to school for our most vulnerable students. Once again, our families persevered.
Just when we thought we had cleared the last hurdle, we were faced with the loss of $250 million in State education aid, a result of the United Federation of Teachers’ refusal to broker a citywide teacher evaluation system. This was one more blow to our schools—especially our students, who deserve an excellent teacher in every classroom, a strong leader in every school, and the extracurricular activities that will keep them on track for college and careers.
As always, we will continue to work towards this most critical and unifying goal: ensuring that our students are best prepared to meet the new and more rigorous Common Core standards, which will ultimately prepare them for future success. However, this is a priority that requires significant financial resources to accomplish. That is why our current fiscal condition concerns me. Let me explain.
The Mayor’s FY 2014 Preliminary Budget includes an allocation of approximately $19.5 billion in operating funds and another $5 billion in education-related pension and debt service funds. This represents a $305 million increase in operating funds and a $444 million increase in education-related pension and debt service funds from FY 2013 levels: $19.2 billion in operating funds and $4.5 billion in pension and debt service. Our funding is a combination of City, State and Federal dollars, with City tax levy dollars making up the largest share of total funding at 56 percent, State dollars at 36 percent, and Federal dollars at 8 percent.
As these numbers reflect, the City, under this Administration, has increased its share in education funding dramatically. In FY 2002, the State and the City evenly shared costs. Since 2002, City-funded spending on education has increased by 134 percent, from $5.9 billion in FY 2002 to $13.7 billion in FY 2014. The continued increase in City-funded education expenses comes as the share of State-funded education expenses has declined. The City now funds 61 percent of non-Federally funded education costs, while the State funds only 39 percent. In fact, our students are still several billion dollars short of the money they are rightly owed under the Campaign for Fiscal Equity decision.
At the same time, the DOE has experienced many rounds of budget tightening. As in the past, we first look centrally for ways to reduce our expenses in order to minimize the impact on our classrooms. In 2008, we were spending $399 million on central administration. By the end of 2012, that figure had fallen to $299 million, a reduction of 25 percent. While the squeeze felt by our schools has unfortunately been very real, total spending on classrooms actually rose during this period. Through this year and next, we are committed to further reducing our central administrative budget by an additional $69 million from its 2012 level, bringing our cumulative contraction to $169 million, over 40 percent. However, at a certain point, cuts run to the bone.
We are still determining the full impact of this challenging fiscal environment; in particular, the $250 million cut in State aid. By taking into account updated budget projections of expenses and by recognizing additional revenues that were not yet included in the City’s Financial Plan, we were able to take offsets against the reduced funds. Moreover, to the extent possible, the budget was reduced by eliminating or reducing other spending in areas that will have the least adverse impact on our students’ education. The Annual Professional Performance Review (APPR) penalty has caused difficult reductions to our budget, including hiring restrictions in schools that have severely limited the replacement of departing teachers, assistant principals and guidance counselors. This will result in the loss of up to 700 teachers through attrition, leading to larger class sizes and increased responsibilities for the teachers who remain.
I have personally been to Albany to tell state legislators that our students should not be punished for the United Federation of Teachers’ obstinance. As you now know, a preliminary budget deal was reached last night and unfortunately restoration of the $250 million was not included.
Next year, the cuts for schools may be even more difficult. Given the loss of $250 million in State aid, there is a strong possibility that school budgets may be reduced.
In spite of these hurdles, I have directed our staff to reallocate resources to ensure that our 1.1 million students are receiving a first-class education. As you know, one of the reductions we were forced to implement was the elimination of the Deferred Program Planning Initiative, which allows principals to roll a modest amount of money from one fiscal year into the next. I am pleased to tell you this morning that we have found a way to avoid the cancellation of this program and our principals will be able to roll unspent money into FY 2014. This process will reduce expenses in FY 2013 by deferring spending into FY 2014.
Additionally, in September 2012, Mayor Bloomberg and I announced an investment of $20 million for the addition of 4,000 full-day pre-kindergarten seats for the 2013-14 school year, accommodating more of the City’s youngest learners in high need areas.
This investment in pre-kindergarten builds on those made throughout the Bloomberg Administration to increase the number of children participating in early education programs. With the collaboration of other City agencies, and under the leadership of Speaker Christine Quinn, the City Council has helped increase universal pre-kindergarten enrollment from 40,000 in 2002 to 58,200 in 2012.
The City has also invested more than $150 million over the past three years in professional development for teachers. We will continue to invest in supporting teachers as we focus on helping schools implement the new Common Core standards, and beginning this fall, a new system of teacher evaluation and development.
As you are aware, New York State adopted the Common Core standards in 2010. Education experts, teachers, and parents developed these standards to describe what students from pre-kindergarten to grade 12 need to know and be able to do to graduate from high school ready for college and careers. Under the new standards, students are reading more, especially non-fiction texts, writing more, thinking critically, using evidence to defend their ideas, and working in teams to solve real-world problems.
This spring, students in grades 3-8 will take State reading and math exams that are based on these higher standards. These tests will be more challenging, and for a valuable and important reason: we want to prepare our children for future success. Last year, the State exams tested basic proficiency, but we are now aiming higher. Make no mistake, the tests will be different and harder and they will establish an entirely new baseline for measuring student performance. They cannot and will not be compared to past years’ test results. Despite these changes, we are confident that our schools and our students will rise to the challenge.
Next year, all schools will be expected to implement Common Core-aligned curriculum. A few weeks ago I announced our new curricula recommendations for grade 3-8 aligned with the Common Core. We went through a rigorous process to select the new curricula. Teachers from across the City partnered with national experts from across the country, as well as network and central staff to evaluate various resources. We believe the programs we have selected represent the highest quality Common Core-aligned curriculum materials available.
Especially given the work of some schools over the past two years to adapt existing curricular resources to align with the Common Core, elementary and middle schools have been empowered to opt-in or -out (fully or partially) of the new Core Curriculum based on the needs of their schools. Those that choose to implement the recommended Core Curriculum will use their allocated New York State Textbook Law (NYSTL) funding, which we will supplement as needed with tax levy funding, to purchase the instructional materials. Our preliminary estimate of $56.5 million for FY 2014 is based on 70 percent of schools choosing to adopt and purchase our recommended curricula.
Given these important investments, it is critical that we continue to find savings and new revenue where possible. That is why we issued a Request for Bid (RFB) for our 1,110 school-age special education bus route contracts set to expire on June 30. This was our first major bid for school-age busing in 33 years. We issued the request in December 2012 to ensure we will have contracts in place by the start of the school year in September. Our successful pre-kindergarten bidding process in November 2011 resulted in a projected savings of $95 million dollars over five years. This bus contract bid is a public process that will improve service, better manage our costs, and generate savings that will be funneled back into our classrooms.
Additionally, we are continuing to maximize efforts to collect Medicaid reimbursements for services provided to eligible students with disabilities. Our goal is to set up each of the claimable areas of Medicaid, including speech, occupational therapy, physical therapy, nursing, and transportation, in a manner so that the process for collecting reimbursements will recur automatically.
We have taken numerous steps to ensure that submitted claims meet all of the federal and state requirements for Medicaid reimbursements. These actions include the creation of internal controls and the continued development of an expert staff, including a Medicaid compliance officer.
On March 20, 2013 the Panel for Education Policy approved a contract with Public Consulting Group to help manage Medicaid requirements with all school-age New York State approved non-public schools with New York City students. At this time we are estimating a potential annual claim of $24 million.
While these cost saving mechanisms will amount to significant savings, we are still operating at a deficit as a result of the loss of $250 million in State aid. This is extremely unfortunate.
I look forward to working with the Council throughout the budget process. I value our partnership on behalf of our students and families. And with that we are happy to take your questions.