News and Speeches

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

03/20/2008

Introduction

Good Morning Chairman Jackson and members of the Education Committee. Deputy Chancellor for Finance and Administration Kathleen Grimm and I are pleased to join you today to discuss the Department of Education’s budget.

In recent years, we’ve come before you with “good news” budget reports. Today, you will not be surprised to hear that our budget outlook is far gloomier than it has been recently. With the economy facing major challenges, we cannot afford to increase spending as much as we have in recent years. The Executive budget request in Albany falls far short of our projected needs, and we are actively lobbying our State leaders while negotiations continue. Our troubles are compounded by the City’s financial forecast, which projects that revenues will decline by about $2 billion. All agencies, including the Department of Education, were required to reduce spending by 2.5% of City tax-levy funds this fiscal year (2008). In January, the Mayor asked all agencies to cut an additional 5% for FY09. Since then, the Office of Management and Budget revised that 5% down to 4.3% and then instructed all agencies, including Education, to cut an additional 3%. The economic challenge our City faces is so great that education cannot be spared. The Department of Education must absorb a proportional cut. We must all keep in mind that spending on the Department of Education makes up about one-third of the City’s entire budget. If education were excluded from this year’s reductions, agencies like Police and Child Welfare would have to absorb a significantly larger cut. No one wants that.

Nobody likes cutting back, especially when it comes to school budgets. We know that we can’t afford to spend more money than we have—but it’s still very difficult for us to make the hard calls we need to make, especially since we pay for critical services that affect the children of our City.

As we sit before you today, we haven’t determined how precisely we will implement the necessary reductions. We are working with you and welcome your thoughts on this matter. We have also reached out to school principals, the UFT, the CSA, and other key stakeholders to work collaboratively and determine the fairest and best way to proceed.

Four key points frame our thinking as we work to determine the specifics of the budget reduction.

First, the hard times we face today followed many years of record increases in education spending. The DOE’s budget is up $7 billion (or 56%) since 2002, including City and State increases. The City has spent 72% more on education under the Mayor’s watch ($4 billion). The State, too, has increased education spending, though by a much smaller percentage (42.1%). The growth in the City’s education spending has outpaced growth in all City spending by about 50%, and, whenever possible, the City has excluded us from PEGs in past years. Plus, importantly, we sent the vast majority of the new money we got to schools. Only 1% of the overall increase went into administration.
Second, we have redirected more than $350 million from the education bureaucracy to schools and classrooms in recent years, giving schools additional money and the power to decide how to spend it.
Third, while we’ve experienced record increases in funding, it’s still not easy to cut back. There are constraints to how we can implement any necessary reductions. Half of our new dollars are paying for an increase in teacher salaries and a significant increase in the number of teachers. About one-third went to increases in school programs where the dollars can be spent for those programs only. Other funds went to things like pension and debt service. We obviously have little room to cut back in these areas.
Finally, as we look ahead to next year, it’s important that we preserve the principles at the center of our reforms—even as we look across the organization for expenses we can cut back. We gave our principals and schools greater discretion because it’s important for the people in charge and closest to the challenges each school faces to have both the responsibility and the authority of leadership. And we must insist on a rigorous system of accountability, without which the entire system would be undermined. We cannot abandon these and other Children First principles just because we face a rough road. We must persevere and work together to keep making progress for the students of New York City.

Last Year’s Progress

Over the past year, since I last came before you to discuss our public school budget, we have made substantial progress, working with principals, teachers, parents, and other members of our New York City school community.

We brought our Children First reforms to the next level, by giving all schools the authority and the resources they needed to build the right educational program for every child, and by holding everyone—from teachers and principals to the Mayor and me—accountable for student academic success. We implemented Fair Student Funding, making sure that all students—and all schools—receive their fair share of the City’s education dollars. And, as I said, we have cut even more money from Central to support our schools.

We have also worked hard to ensure that each student has the best possible teacher. We have invested heavily in teachers. Today, we are paying teachers 43% more than we were at the start of the administration. We have hired more teachers—we added about 1,800 additional classroom teachers since last year—and reduced class size. We’ve also implemented incentive programs to entice teachers to teach in our highest needs schools. And we’re just now starting a schoolwide performance bonus program to financially reward teachers at some of our highest needs schools that help kids make academic progress. These steps are already yielding real results and will continue having an affect on student learning in years to come.

And in the past year, we have also substantially advanced public school empowerment. Today, all schools are empowered to choose the support they want rather than accepting what the bureaucracy offers up. In exchange for increased funds and increased decision-making power, principals and schools are being held to higher standards.

In the past year, we have also created a more robust and effective support structure for parents—so they can resolve their concerns in their own neighborhoods and play an even more hands-on role in their children’s education. And we have given families unprecedented levels of information about their own children’s performance through our new Progress Reports and Learning Environment Surveys.

I also want to speak to an area where we have collaborated with the Speaker and the Council— our middle school success plan. We thank the Council and our other partners for the work of the Council’s Middle School Task Force, and have already begun to implement several of its recommendations, which will address the needs of our middle schools, especially our lowest-performing middle schools.

We still have a long way to go, but our work is having a real impact on our students’ learning. More students are on target in math and reading. Our graduation rate is the highest it’s been in decades. This past fall, we won the nation’s most prestigious education award, the Broad Prize. We won it because of our record of success in improving student learning and narrowing the achievement gap.

These are advancements of which we can all be proud.

The Year Ahead

This year, as you know, the City preliminary FY09 budget contains $20.9 billion for education. That represents an increase of from last year’s budget. But in this case, more money doesn’t mean we’re better off because our costs are rising, too. And growth in costs associated with big-ticket items like collective bargaining, energy, and debt service are climbing faster than our budget is growing.

And as the City’s budget outlook has worsened this year, the Mayor’s office has taken steps to ensure that we don’t spend more than we have. What you hope in government is that your tax revenues go up at least as fast as expenses. Between 2006 and 2007, New York City’s tax revenues grew by 11%. As of the January Preliminary Budget and Financial Plan, City tax revenues have declined between 2007 and 2008 by 2.8%, and are forecast to decline further between FY2008 and 2009 by another 2.8%. Things have not improved since January. Because we are required by law to have balanced operating results each year, it is necessary to look at how to reduce City spending while preserving essential City services like Education.

We, like all City agencies, had to cut 2.5% in the middle of the current fiscal year. Keep in mind that less than a year ago we cut back our central and field budgets significantly, by $174 million. We sent these savings to schools and classrooms in a year when there was no PEG, no mandate to reduce spending. This year, we achieved central reductions by cutting information technology, reducing surplus reserves, reducing cost estimates, reducing non-personnel expenses throughout various departments, and reducing assessment costs and facilities costs. We also implemented a hiring control plan and eliminated vacancies and we re-estimated $47 million of projected revenue that we gave back to OMB. Still, we were not able to spare the schools and had to reduce schools by $100 million (or 1.2% of their total budgets). The day we made the cut, more than $200 million in school funds were uncommitted or unscheduled. In a typical year, schools leave more than $50 million unspent. This year, the amount projected for rollover is almost twice that amount. Still, I understand that cuts are not easy, especially when they come in the middle of the year. We have worked—and are continuing to work—closely with our school principals to help them absorb this reduction and I am very proud of our principals for showing real leadership in this difficult time.

As we face the FY09 budget, we must determine how to absorb the necessary reductions with the goal of minimizing impact to our schools. We must also make sure that we are strategically targeting our resources to the areas with that we know have the greatest impact on student achievement. At the same time, I am committed to taking a hard look at how we spend money to ensure that every dollar is being spent in the best way possible. What I have been telling our principals and what I am telling you today is that EVERYTHING is on the table—including the services offered by our Integrated Service Centers, Human Resources, and Finance, and Legal teams. That said, our flexibility is limited. It’s clear that we must have teachers in classrooms, meet contractual obligations, feed and transport students, provide students with books and other instructional materials, send out paychecks and handle benefits, and keep the phones working and the lights and heat on. We’re looking the hardest at all central and field offices, but we need to recognize that we won’t be able to limit reductions to these areas. After slimming down the bureaucracy, central’s entire budget (including critical functions like HR, legal, and payroll) amounts to only $0.5 billion, leaving us little choice but to look to all parts of the system, including the schools, for savings.

Conclusion

In conclusion, I am extremely proud of every teacher, parent, student, and principal in our City, and I know that our commitment to achievement will not let up as we face hard times. I am confident that we will continue to work together to achieve success.

We all know that we have much more work to do. I look forward to your assistance as we strive to make our schools as good as we know they must be.

Thank you for your time. I would be pleased to answer your questions.

About Us Academics Choices & Enrollment Schools in the Community Offices & Programs Media Relations News and Speeches Chancellor's Biography Media Consent Forms Contact Us Rules & Policies Student Support, Safety, and Activities Student Performance & Accountability	News and Speeches E-mail to a friend Chancellor Klein's Testimony on DOE Budget Before City Council Education Committee 03/20/2008 Introduction Good Morning Chairman Jackson and members of the Education Committee. Deputy Chancellor for Finance and Administration Kathleen Grimm and I are pleased to join you today to discuss the Department of Education’s budget. In recent years, we’ve come before you with “good news” budget reports. Today, you will not be surprised to hear that our budget outlook is far gloomier than it has been recently. With the economy facing major challenges, we cannot afford to increase spending as much as we have in recent years. The Executive budget request in Albany falls far short of our projected needs, and we are actively lobbying our State leaders while negotiations continue. Our troubles are compounded by the City’s financial forecast, which projects that revenues will decline by about $2 billion. All agencies, including the Department of Education, were required to reduce spending by 2.5% of City tax-levy funds this fiscal year (2008). In January, the Mayor asked all agencies to cut an additional 5% for FY09. Since then, the Office of Management and Budget revised that 5% down to 4.3% and then instructed all agencies, including Education, to cut an additional 3%. The economic challenge our City faces is so great that education cannot be spared. The Department of Education must absorb a proportional cut. We must all keep in mind that spending on the Department of Education makes up about one-third of the City’s entire budget. If education were excluded from this year’s reductions, agencies like Police and Child Welfare would have to absorb a significantly larger cut. No one wants that. Nobody likes cutting back, especially when it comes to school budgets. We know that we can’t afford to spend more money than we have—but it’s still very difficult for us to make the hard calls we need to make, especially since we pay for critical services that affect the children of our City. As we sit before you today, we haven’t determined how precisely we will implement the necessary reductions. We are working with you and welcome your thoughts on this matter. We have also reached out to school principals, the UFT, the CSA, and other key stakeholders to work collaboratively and determine the fairest and best way to proceed. Four key points frame our thinking as we work to determine the specifics of the budget reduction. First, the hard times we face today followed many years of record increases in education spending. The DOE’s budget is up $7 billion (or 56%) since 2002, including City and State increases. The City has spent 72% more on education under the Mayor’s watch ($4 billion). The State, too, has increased education spending, though by a much smaller percentage (42.1%). The growth in the City’s education spending has outpaced growth in all City spending by about 50%, and, whenever possible, the City has excluded us from PEGs in past years. Plus, importantly, we sent the vast majority of the new money we got to schools. Only 1% of the overall increase went into administration. Second, we have redirected more than $350 million from the education bureaucracy to schools and classrooms in recent years, giving schools additional money and the power to decide how to spend it. Third, while we’ve experienced record increases in funding, it’s still not easy to cut back. There are constraints to how we can implement any necessary reductions. Half of our new dollars are paying for an increase in teacher salaries and a significant increase in the number of teachers. About one-third went to increases in school programs where the dollars can be spent for those programs only. Other funds went to things like pension and debt service. We obviously have little room to cut back in these areas. Finally, as we look ahead to next year, it’s important that we preserve the principles at the center of our reforms—even as we look across the organization for expenses we can cut back. We gave our principals and schools greater discretion because it’s important for the people in charge and closest to the challenges each school faces to have both the responsibility and the authority of leadership. And we must insist on a rigorous system of accountability, without which the entire system would be undermined. We cannot abandon these and other Children First principles just because we face a rough road. We must persevere and work together to keep making progress for the students of New York City. Last Year’s Progress Over the past year, since I last came before you to discuss our public school budget, we have made substantial progress, working with principals, teachers, parents, and other members of our New York City school community. We brought our Children First reforms to the next level, by giving all schools the authority and the resources they needed to build the right educational program for every child, and by holding everyone—from teachers and principals to the Mayor and me—accountable for student academic success. We implemented Fair Student Funding, making sure that all students—and all schools—receive their fair share of the City’s education dollars. And, as I said, we have cut even more money from Central to support our schools. We have also worked hard to ensure that each student has the best possible teacher. We have invested heavily in teachers. Today, we are paying teachers 43% more than we were at the start of the administration. We have hired more teachers—we added about 1,800 additional classroom teachers since last year—and reduced class size. We’ve also implemented incentive programs to entice teachers to teach in our highest needs schools. And we’re just now starting a schoolwide performance bonus program to financially reward teachers at some of our highest needs schools that help kids make academic progress. These steps are already yielding real results and will continue having an affect on student learning in years to come. And in the past year, we have also substantially advanced public school empowerment. Today, all schools are empowered to choose the support they want rather than accepting what the bureaucracy offers up. In exchange for increased funds and increased decision-making power, principals and schools are being held to higher standards. In the past year, we have also created a more robust and effective support structure for parents—so they can resolve their concerns in their own neighborhoods and play an even more hands-on role in their children’s education. And we have given families unprecedented levels of information about their own children’s performance through our new Progress Reports and Learning Environment Surveys. I also want to speak to an area where we have collaborated with the Speaker and the Council— our middle school success plan. We thank the Council and our other partners for the work of the Council’s Middle School Task Force, and have already begun to implement several of its recommendations, which will address the needs of our middle schools, especially our lowest-performing middle schools. We still have a long way to go, but our work is having a real impact on our students’ learning. More students are on target in math and reading. Our graduation rate is the highest it’s been in decades. This past fall, we won the nation’s most prestigious education award, the Broad Prize. We won it because of our record of success in improving student learning and narrowing the achievement gap. These are advancements of which we can all be proud. The Year Ahead This year, as you know, the City preliminary FY09 budget contains $20.9 billion for education. That represents an increase of from last year’s budget. But in this case, more money doesn’t mean we’re better off because our costs are rising, too. And growth in costs associated with big-ticket items like collective bargaining, energy, and debt service are climbing faster than our budget is growing. And as the City’s budget outlook has worsened this year, the Mayor’s office has taken steps to ensure that we don’t spend more than we have. What you hope in government is that your tax revenues go up at least as fast as expenses. Between 2006 and 2007, New York City’s tax revenues grew by 11%. As of the January Preliminary Budget and Financial Plan, City tax revenues have declined between 2007 and 2008 by 2.8%, and are forecast to decline further between FY2008 and 2009 by another 2.8%. Things have not improved since January. Because we are required by law to have balanced operating results each year, it is necessary to look at how to reduce City spending while preserving essential City services like Education. We, like all City agencies, had to cut 2.5% in the middle of the current fiscal year. Keep in mind that less than a year ago we cut back our central and field budgets significantly, by $174 million. We sent these savings to schools and classrooms in a year when there was no PEG, no mandate to reduce spending. This year, we achieved central reductions by cutting information technology, reducing surplus reserves, reducing cost estimates, reducing non-personnel expenses throughout various departments, and reducing assessment costs and facilities costs. We also implemented a hiring control plan and eliminated vacancies and we re-estimated $47 million of projected revenue that we gave back to OMB. Still, we were not able to spare the schools and had to reduce schools by $100 million (or 1.2% of their total budgets). The day we made the cut, more than $200 million in school funds were uncommitted or unscheduled. In a typical year, schools leave more than $50 million unspent. This year, the amount projected for rollover is almost twice that amount. Still, I understand that cuts are not easy, especially when they come in the middle of the year. We have worked—and are continuing to work—closely with our school principals to help them absorb this reduction and I am very proud of our principals for showing real leadership in this difficult time. As we face the FY09 budget, we must determine how to absorb the necessary reductions with the goal of minimizing impact to our schools. We must also make sure that we are strategically targeting our resources to the areas with that we know have the greatest impact on student achievement. At the same time, I am committed to taking a hard look at how we spend money to ensure that every dollar is being spent in the best way possible. What I have been telling our principals and what I am telling you today is that EVERYTHING is on the table—including the services offered by our Integrated Service Centers, Human Resources, and Finance, and Legal teams. That said, our flexibility is limited. It’s clear that we must have teachers in classrooms, meet contractual obligations, feed and transport students, provide students with books and other instructional materials, send out paychecks and handle benefits, and keep the phones working and the lights and heat on. We’re looking the hardest at all central and field offices, but we need to recognize that we won’t be able to limit reductions to these areas. After slimming down the bureaucracy, central’s entire budget (including critical functions like HR, legal, and payroll) amounts to only $0.5 billion, leaving us little choice but to look to all parts of the system, including the schools, for savings. Conclusion In conclusion, I am extremely proud of every teacher, parent, student, and principal in our City, and I know that our commitment to achievement will not let up as we face hard times. I am confident that we will continue to work together to achieve success. We all know that we have much more work to do. I look forward to your assistance as we strive to make our schools as good as we know they must be. Thank you for your time. I would be pleased to answer your questions.