Hochul-backed think tank releases report on new way to determine local school aid

ALBANY — A road map for how New York State could revamp its nearly two-decade-old method of allocating school funding was released late Monday, a month before the 2025 legislative session starts.

Gov. Kathy Hochul and the State Legislature earlier this year earmarked $2 million for the Rockefeller Institute of Government, an Albany-based think tank, to conduct an analysis of the state’s complex school aid formula known as Foundation Aid. Education advocates for years have called for the formula to be updated to factor in changing student populations, regional costs and changes in poverty.

Foundation aid is the single-largest source of financial support for public schools in New York State, sending billions of dollars annually to schools in Nassau and Suffolk counties alone.

The formula, first enacted in the 2007-08 school year, considers a number of factors to determine aid including student need, regional cost differences, the cost of a successful education and local district fiscal capacity, including how much districts expect to raise from local sources, primarily property taxes. Parts of the formula are updated regularly, but some are frozen. For example, it still uses 2000 census poverty data.

The recommendations aim to more equitably distribute aid, so districts with larger populations and those in high-poverty areas, for example, would get more funds. The recommendations give more weight to students who have higher needs — for example, economically disadvantaged students, English Language Learner students with disabilities and those in foster care — so districts would get funding to better support them. And the report suggests changing how inflation is calculated in the formula to better reflect the costs faced by districts.

The report recommends a phased-in approach so no district sees large year-to-year changes in funding.

"While the Foundation aid formula is a vast improvement on the education financing approach previously used by the State, several of its components have grown stale," Rockefeller Institute of Government President Bob Megna said in the report.

'Menu of options'

The 314-page report represents a "menu of options" for policymakers to address issues with the formula’s components "while giving school administrators the reliability and predictability they need," Megna wrote.

The report describes five themes that emerged during public hearings held across the state, including Long Island, over the summer. They include the need to address the funding needs of English Language Learners who typically need more resources; outdated poverty data; the accuracy and specificity of regional costs; and increased duties of school districts that weren't part of the original funding equation. 

State lawmakers and education advocates now have a month to absorb the report’s findings before the legislative session starts in January.

At least some of the recommendations are expected to be included in the governor’s executive budget proposal in January for the next fiscal year, which begins April 1.

“This study’s comprehensive findings will help inform ongoing discussions with the Legislature and key stakeholders about how we better align our spending to meet the needs of future generations of students," Kara Fesolovich, a spokesperson for Hochul, said in an emailed statement on Tuesday.

'Hold-harmless' 

The complex formula was enacted after the state’s highest court ruled in 2006 that New York was underfunding schools and not meeting its constitutional burden to provide students with a "sound basic education." The original court case focused on New York City schools, but the state adopted the formula for all districts. It replaced more than 30 stand-alone aid categories, a move intended to create equity and give school administrators a better idea of the aid they’d receive each year.

Foundation aid was fully funded under Hochul.

Last budget cycle, Hochul, citing declining school enrollment over the last decade, proposed ending a part of the formula known as "hold-harmless," which guarantees no school district receives less aid than the year before even if enrollment changes. The proposal was criticized by some education advocates, school leaders and state lawmakers who feared it would result in less state aid for districts. Hochul and lawmakers instead agreed to wait and study the formula.

The report recommended several changes to hold-harmless, including creating a per-pupil local income and property wealth threshold. The report says that policymakers could create a three- or five-year phase-out schedule for planned reductions of hold-harmless.

“As we craft the upcoming Executive Budget, the Governor believes we should avoid proposals that would negatively impact school budgets, such as eliminating the hold-harmless provision of the Foundation Aid formula,” Fesolovich said.

New York State United Teachers President Melinda Person said in a statement the union supports some of the report's recommendations, adding that updating the formula is a "critical step forward."

"However, we remain concerned about recommendations that arbitrarily lower the Foundation Aid amount instead of considering the necessary support for our schools’ evolving student populations. Any changes to the formula must prioritize stability and predictability for school districts," said Person, who heads the state’s largest teachers union representing nearly 700,000 members.

Needed updates

The study also recommends updating and revising the "successful schools model," which looked at successful districts’ per-pupil spending. The model largely used test scores to measure academic outcome and the report recommends finding an alternative way to measure student success.

The report calls for using a five-year average of inflation rates, through the U.S. Consumer Price Index for the Northeast region, to better reflect cost increases being faced by districts.

It recommends replacing outdated poverty measures, which currently rely on free and reduced price lunch data, with the Small Area Income and Poverty Estimates rate, which counts children ages 5 to 17 in poverty. The rate should prioritize districts with greater concentrations of student poverty to receive more funding, the report said. It also recommended using the rate to better calculate student population, using a three-year average.

The report recommends providing a different weight for English Language Learners based on their level of proficiency, rather than having a single weighting for all ELL students — providing more funding where it’s needed.

The recommendations also include updating how regional costs and local contributions are calculated. 

Assemb. Ed Ra (R-Franklin Square) on Monday emphasized the urgent need for the formula to be updated, particularly with changes in technology, evolving job markets and new opportunities.

"Ensuring our children have the tools and knowledge they need to succeed in today’s world is our most important responsibility," he said in a news release. "The outdated funding formula is shortchanging our local schools, depriving them of the resources necessary for critical programs that are essential to our students’ futures."