THE STATE EDUCATION DEPARTMENT / THE UNIVERSITY OF THE STATE OF NEW YORK / ALBANY, NY 12234

 

TO:	Subcommittee on State Aid
FROM:	Jean C. Stevens
SUBJECT:	Development of Regents 2007-08 Proposal on State Aid to School Districts
DATE:	June 7, 2006
STRATEGIC GOAL:	Goals 2 and 5
AUTHORIZATION(S):

 

SUMMARY

 

Issue for Discussion

 

Is the funding mechanism for statewide pre-kindergarten adequate for statewide implementation and expansion?  How does the relative purchasing power of school districts vary around the State?  Has this changed since the Regents proposed a cost adjustment in school aid three years ago?

 

Reason(s) for Consideration

 

Review of policy.

 

Proposed Handling

 

These questions will come before the Subcommittee on State Aid at your June meeting.

 

Procedural History

 

The Regents proposal on State Aid to school districts has been under development since February 2006.  In May, the Subcommittee on State Aid began an initial inquiry on the status of the new $50 million allocated to Universal Pre-kindergarten for the 2006-07 school year.  This inquiry led to a desire for further and expanded information at the June 2006 meeting on pre-kindergarten education.  In addition, staff will present an update of the regional cost index, one of four components of the Regents proposed foundation formula.

 

 

Background Information

 

The importance of pre-kindergarten as a cornerstone program to building strong statewide early childhood programs is a high priority for the Board of Regents and school districts.  It is a highly researched and effective educational component for closing the achievement gap.  To ensure that the program is available to all districts and four-year-olds, critical discussions regarding funding must be held.  For pre-kindergarten to become an integral part of a pre-kindergarten-grade 12 public school system, discussion regarding the funding mechanism is as important as the level of funding.  The program has been implemented via a grant process and, although this has been a successful way to phase in the program, it may not be the most effective way to sustain the program statewide.  Attachment A provides information and analysis.

 

Adjusting State Aid for school operation and maintenance for cost differences around the State has been recommended by Blue Ribbon panels and legislative commissions over the years.  The Regents have developed a professional wage-based model of assessing cost differences around the State.  The result is that a dollar of State Aid should buy the same amount of goods and services regardless of the region of the State.  Attachment B provides an update of the Regents regional cost index.

 

Recommendation

 

Staff recommend that a foundation aid approach be considered for funding universal pre-kindergarten education in the 2007-08 Regents State Aid proposal and that the Regents foundation aid proposal be updated using the regional cost index described in the attached report.

 

Timetable for Implementation

 

In July, the Regents will review the draft conceptual proposal for the Board’s 2007-08 State Aid proposal and be asked to approve it in September.  In October, the Regents will consider for approval the details on funding recommendations.

 

 

 

Attachment

 

Attachment A

Overview of Fiscal Structure for

Statewide Pre-kindergarten

 

 

·       Funding History

 

Targeted Pre-kindergarten Program

 

-                  The State has provide $50 million from 1992 to the present

-                  96 districts are implementing targeted pre-kindergarten programs

 

Universal Pre-kindergarten  (UPK)

 

-                  In 1997, legislative action set forth a five-year schedule for phasing in universal pre-kindergarten education as follows:

s       $67 million for 1998-99

s       $100 million for 1999-2000

s       $225 million for 2000-01

s       $500 million for 2001-02 and continuing

 

-                  Legislative action produced the following results:

s       $67 million for 1998-99

s       $100 million for 1999-2000

s       $225 million for 2000-01

s       $205 million was allocated for 2001-02 through the present

 

-                  School Year 2005-06

 

s       197 districts implementing programs

s       977 community-based organizations are used as settings for universal pre-kindergarten by school districts

s       Approximately 60 percent of the funding that districts receive goes to contracts with community-based organizations for pre-kindergarten program

s       Distribution of funds by Need-Resource Category (see attached charts)

s       New York City receives 72 percent of UPK funding.(and 35 percent of targeted pre-kindergarten funding)

s       Each of the Big 5 city school districts has had full day kindergarten for many years

 

-                  School Year 2006-07

 

s       $205 million for districts who received grants in 2005-06

s       $50 million more for supplemental pre-kindergarten grants (for program expansion)

s       $50 million for continuing targeted pre-kindergarten

 

 

·       Advantages of Current Mechanism

 

-                  The purpose of a grant allocation is to target funding for a specific purpose – in this regard the initial purpose has been successful.  The grant allocation has been successful in building a critical mass of universal pre-kindergarten programs across the State.

 

·       Disadvantage of Current Mechanism

 

-                  A grant allocation is a highly burdensome and restrictive way to move a focused program to a statewide component of this public education system.  Three grant programs with separate funding systems complicate the State support for pre-kindergarten programs.  The grant system is at the end of its useful life as a funding mechanism for sustainability.  The grant program has been expanded to three different grant programs all with different mechanisms to achieve similar purposes. The result is a very complex and restricting mechanism that may prohibit expansion – the desired outcome.  Results include:

 

s       the grant has been frozen;

s       formulas have been suspended;

s       amounts have been layered ;

s       the grant allocation process has been revised and tweaked; and

s       a large amount of work is required of SED with no administrative funds.

 

Attachment B

 

Updating the Regents Regional Cost Index

 

The Regents proposed foundation formula provides State support for school operation and maintenance.  It includes four working parts:

 

·       A foundation amount which represents the cost of meeting the standards in successful school districts.

·       A regional cost index which adjusts the foundation amount for regional variations in cost to provide the same purchasing power for each dollar of State Aid.

·       A pupil need index which adjusts the foundation amount to provide more State Aid to school districts with concentrations of student poverty.

·       An expected local share which recognizes a fair local share of the adjusted foundation amount for each district.

 

This paper explores one of these four elements, the regional cost index, and provides information on updating the index for the Regents proposal.

 

The regional cost index was developed in recognition of the geographic cost variations in different areas of New York State.  The index, which is based on the work of researchers for the state of Oregon, uses median salaries in professional occupations that require similar credentials to that of positions in the education field.  These occupational titles typically require a bachelor’s degree for employment at the entry level.  The cost index was created from the wages of 59 professional, non-education occupations.  Education-related titles were excluded to ensure that the index measured labor market costs and not the tastes or control of school districts. 

 

Professional Cost Index for New York State by Labor Force Region (2006)
Labor Force Region	Index Value	Purchasing Power of $1,000 by Region
Capital Distict	1.125	$889
Southern Tier	1.046	$956
Western New York	1.091	$917
Hudson Valley	1.314	$761
Long Island/NYC	1.425	$702
Finger Lakes	1.142	$876
Central New York	1.104	$906
Mohawk Valley	1.000	$1,000
North Country	1.000	$1,000

 

 

Methodology

 

Construction of the Index

 

In order to adjust for geographic variations in the cost of educational resources, the regional cost index (RCI) was generated following a methodology similar to one developed by Rothstein and Smith[1] for the state of Oregon.   This involved the use of a statewide index based on median salaries in professional occupations that require similar credentials to that of positions in the education field.  In particular, these titles represented categories for which employment at the entry level typically requires a bachelor’s degree.  The professional occupations selected for use in this index are based on a list of 94 occupational titles developed for use in the state of Oregon.

 

The previous RCI was based on 63 of the 94 occupational titles used in the Oregon study.[2]  However, due to a lack of employment data within many of New York State’s 10 Labor Force Regions, 59 titles were used for this edition of the RCI.  The titles used appear in Appendix A.  In addition to those titles with missing data, the final list excluded teachers, other educational positions and categories that tended to be restricted to federal and state government, since the markets for teachers and for many government positions tend not to be fully competitive.  Education-related titles were also excluded in order to ensure that this index be entirely a measure of labor market costs, and not be subject to the tastes or control of districts.  Therefore, we sought to measure genuine labor market costs, not the results of districts’ decisions to hire especially high quality teachers, or to influence the index value in later years by choosing to pay more for staff.  By basing the index on the wages earned in the labor market by professionals with similar skills, we have created a measure of costs in the sector of the labor market in which districts compete for teachers and staff, in each region of the State.  Since personnel salaries and benefits make up the vast majority of the costs faced by school districts, the RCI allows for an individual to compare the buying power of the educational dollar in the different labor force regions of the State.

 

Selection of Occupational Titles

 

The data on which the RCI is based was made available through the New York State Department of Labor.  Since the original edition of the RCI, the structure of the occupational title system has been revised.  This has resulted in the expansion of a number of titles.  However, due to a lack of employment data, a fair amount of the titles were eliminated.  In the end, 50 titles had both employment and wage data, 7 were plugged with wage data, and an additional 2 employment titles were plugged where data was available statewide and for 9 of the 10 labor force regions.  In all, 59 occupational titles were used for this analysis.

 

Statewide Median Wage

 

The first step in generating a regional cost adjustment from the list of 59 titles was to establish a statewide median wage figure for which median wages in each labor force region could be compared for indexing purposes.  The statewide median wage was calculated by taking the total number of employees in each of the 59 titles for the State as a whole (for example, the total number of people working in the title “pharmacist” across the State), and multiplying that amount by the median annual wage for that title (13,410 pharmacists * $86,841).  This result was then summed for all titles, and then divided by the total number of employees in all 59 occupational titles (1,026,769).  This produced a weighted annual median wage of $69,975 for the professional titles making up the index.

 

Title Weightings

 

It was important to avoid the possibility that the index could be skewed due to compositional differences in the percentage distribution or mix of the individuals occupying the 59 selected titles.  Therefore, if professional wages in the titles selected were found to be identical in two labor force regions, but 60 percent of the employees in region A occupied the 10 lowest salaries titles (vs. a 10 percent employee representation in these lower salary titles in region B), a simple summation of wages could lead to the erroneous conclusion that professional service costs were far higher in region A than in region B.  In short, “apparent” cost differences would be due totally to differences in the title composition of the workforce, not to true wage differences in those titles.

 

This problem was avoided by weighting the wage for each title based on the relative importance of that title in the group of 59 titles statewide.  Thus, in determining the regional differences in median wage, we assume that the “mix” of jobs in each region is the same as the “mix” in the State as a whole.  These title weights were then applied to each region, therefore making the distribution or service “mix” of titles a constant across the State.  For example, if sales managers made up 10% of the total number of employees statewide in the 59 titles, then a 0.10 compositional weighting was assigned to sales managers in every region.  This title weighting procedure thus imputes to every labor force region precisely the same mix of employees across the 59 titles in every region.

 

Title weights were generated by dividing the statewide number of employees in a given title by the total number of employees in the 59 titles of the index.  For example, the number of pharmacists statewide was 13,410, which was then divided by 1,026,769 (the total number of workers in the State in these 59 titles.)  This yielded a title weight of 0.0130.  (Since this was performed for all the titles in the list, the sum of all title weightings equals one.)

 

Final Calculation of the Regional Index

 

Once the title weights were determined, they were incorporated into the data set for each of the ten labor force regions.  The median annual wage for each title was multiplied by the title weight.  This result was summed for all 59 titles, yielding a regional median wage.  This regional median was divided by the statewide weighted median professional service wage to yield the final professional service wage index for each region.  These results were then normed on the North Country.

 

When median wage data were missing for a title in a given region, the solution was based on the creation of a similar regional cost index, using a smaller set of occupational titles (those titles, in which data was not missing in any region of the State, n=50).  The smaller index, in conjunction with the statewide median salary information for any occupational title that was lacking salary information in a specific region, was used to estimate the missing regional salary item.

 

Data

 

While the list of professional occupations used to create the RCI was based on the work of Rothstein and Smith in Oregon, the Bureau of Labor Statistics provided the wage data used in the index.  The wage data was obtained from the 2004 Occupational Employment Statistics (OES) Survey, which allows employers to report the number of employees and wages for each title they employ.  The United States Department of Labor has noted, “Establishment surveys have little information on the demographics of their employees, but…wages and earnings tend to be more accurately reported in establishment surveys as they are based upon administrative records rather than recall by respondents…These factors make establishment data the natural choice…[3]”

 

The data from the 2004 Occupational Employment Survey for New York State was made available to the staff of the New York State Education Department through the New York State Department of Labor.  Therefore, data was provided for all of the 671 occupational titles in each of the 10 labor force regions in New York State, as well as a statewide total for all titles.  The wage data obtained from the OES is based on “straight-time, gross pay, exclusive of premium pay. Base rate, cost-of-living allowances, guaranteed pay, hazardous-duty pay, incentive pay including commissions and production bonuses, tips, and on-call pay are included. Excluded are back pay, jury duty pay, overtime pay, severance pay, shift differentials, nonproduction bonuses, employer cost of supplementary benefits, and tuition reimbursements.”[4]

 

The Bureau of Labor Statistics develops its estimates through the use of an annual mail survey of about one-third of the establishments state- (and nation-) wide in occupational groups such as business and financial operations; transportation and material moving; personal care and service; architecture and engineering; office and administrative support; and management.[5]  The survey is repeated in a three-year cycle, whereas the cycle continues, data from the third of establishments surveyed in current years builds on previous years’ data, in a process called wage updating.  This results in detailed and precise estimates of wage levels even in small job categories or geographic regions.  In the fourth year, the survey cycle starts over.

 

Since wage data is built-up over a three-year period, the approximations of wages become increasingly accurate and most precise in the third year.  This year’s index calculations are based on the most accurate data-year in the cycle, and thus inspire confidence that the results are a good representation of the variation in professional service costs around the State.  The triennial nature of the data suggests that the RCI need only be updated in those years for which the most accurate data in the cycle are available.

 

It should be noted that the index results for New York City and Long Island were combined.  A single median wage was calculated for this labor force area, because there is evidence that these two areas actually function as a single labor market region.  With professionals, especially those in the education professions, moving to jobs across the lines between New York City and Long Island, it is necessary to consider this entire region as a single area, with similar wage costs.

 

Occupational Titles Used for the Regional Cost Index

 

 

1.     Chief Executives

2.     General and Operations Managers

3.     Advertising and Promotions Managers

4.     Marketing Managers

5.     Sales Managers

6.     Public Relations Managers

7.     Administrative Services Managers

8.     Computer and Information Systems Managers

9.     Financial Managers

10. Human Resources Managers

11. Industrial Production Managers

12. Purchasing Managers

13. Transportation, Storage, and Distribution Managers

14. Construction Managers

15. Engineering Managers

16. Medical and Health Services Managers

17. Property, Real Estate, and Community Association Managers

18. Social and Community Service Managers

19. Purchasing Agents, Except Wholesale, Retail, and Farm Products

20. Cost Estimators

21. Employment, Recruitment, and Placement Specialists

22. Training and Development Specialists

23. Management Analysts

24. Accountants and Auditors

25. Budget Analysts

26. Financial Analysts

27. Loan Officers

28. Computer Programmers

29. Computer Systems Analysts

30. Network and Computer Systems Administrators

31. Civil Engineers

32. Electrical Engineers

33. Industrial Engineers

34. Mechanical Engineers

35. Civil Engineering Technicians

36. Electrical and Electronic Engineering Technicians

37. Environmental Scientists and Specialists, Including Health

38. Market Research Analysts

39. Clinical, Counseling, and School Psychologists

40. Substance Abuse and Behavioral Disorder Counselors

41. Child, Family, and School Social Workers

42. Medical and Public Health Social Workers

43. Mental Health and Substance Abuse Social Workers

44. Librarians

45. Graphic Designers

46. Public Relations Specialists

47. Writers and Authors

48. Dietitians and Nutritionists

49. Pharmacists

50. Physician Assistants

51. Physical Therapists

52. Recreational Therapists

53. Speech-Language Pathologists

54. Medical and Clinical Laboratory Technologists

55. Medical and Clinical Laboratory Technicians

56. Police and Sheriff's Patrol Officers

57. Recreation Workers

58. Residential Advisors

59. Interviewers, Except Eligibility and Loan