Big Apple Hits Jackpot in School Finance Case

Published February 1, 2005

In an escalating conflict with the separation of powers doctrine, a court-appointed panel on November 30, 2004 unanimously determined that New York state lawmakers must find an additional $5.63 billion per year in operating funds for the New York City public schools–plus another $9.2 billion for facilities–to provide the city’s 1.1 million students with the free education guaranteed to them by the state constitution’s Education Clause.

The $5.63 billion would increase the city’s $12.62 billion school operations budget by almost 45 percent, to $18.25 billion, raising spending from about $11,500 per pupil to some $16,600 per pupil. That would lift New York City spending well above the state average of approximately $12,100 per pupil for the 2003-04 school year, when 2,842,097 students shared operational spending of $34.27 billion.

The panel of three special masters was appointed last year by State Supreme Court Justice Leland DeGrasse when state legislators failed to meet a deadline of July 30, 2004, set by New York’s Court of Appeals in a 4-1 ruling on June 26, 2003. The Court had given legislators 13 months to reform the state’s school funding system so that it provided all students with the opportunity to receive a “sound basic education.” However, lawmakers could not agree on how much additional money to provide to the city’s public schools or how to make the additional funds available, whether through new tax levies or spending cuts in other areas.

The problem facing lawmakers is that “neither the state nor the city can finance the remedy suggested by Judge DeGrasse’s referees” without substantial tax increases, said Manhattan Institute Senior Fellow E.J. McMahon.

Although the separation of powers doctrine found in the U.S. Constitution places the responsibility for making policy decisions in the legislative branch of government, New York’s judicial branch has usurped that authority with regard to education decisions. New York judges are now making policy decisions on education quality and education spending, and ordering legislators in Albany to implement those decisions.

The special masters want state legislators to act quickly, too, recommending they be required to make the first of five annual payments of $1.8 billion to the city’s schools for capital spending within 90 days. DeGrasse conducted a hearing on the special masters’ report on January 12 and is expected to issue an order on its recommendations shortly thereafter.

Success for Advocacy Group

The panel report is the latest development in a lawsuit that was first filed against New York state 12 years ago by the school-finance litigation group Campaign for Fiscal Equity (CFE), charging the state unconstitutionally underfunded the city’s public schools. Although CFE’s lawyers have ostensibly been working pro bono on the case, they asked the trial court for a total of $21 million in fees after a final Appeals Court ruling in 2003. One purported “pro bono” lawyer asked for $3.27 million at an average hourly rate of $551, according to City Journal‘s Sol Stern.

CFE is committed to forcing statewide reform and has made clear its intention “to transform the panel’s recommendations and the court order into a statewide reform bill to avoid any technical formula problems, uncertainty, and political complications.”

Although the court has no authority to suggest reforms for school districts outside of New York City, the judicial panel agreed the funding solution should be applied statewide.

“We … strongly support the consensus among the parties and the amici that New York State must re-evaluate and reform its funding formulas,” the panel stated in its final report.

CFE’s interests in education funding aren’t limited to New York state. A national project of CFE, called ACCESS, aims to “expand and strengthen the national movement of advocates who support adequate funding for public education and improved public schools in all states.”

Just 26 Words

Although most states have constitutions with a mandate calling for some standard of educational quality–or a more specific mandate calling education “fundamental” or “paramount”–New York is one of only 15 states with constitutions that simply impose an obligation to maintain a system of free public schools, and nothing more. Article XI, Section 1, of New York’s constitution says nothing about educational quality but simply states:

“The legislature shall provide for the maintenance and support of a system of free common schools, wherein all the children of this state may be educated.”

As the case of Campaign for Fiscal Equity v. State of New York (CFE) progressed through various court decisions over the past 12 years, the meaning and imperative of those 26 words, added to the constitution in 1894, was substantially expanded.

Redefining Sound and Basic

In 1982, the Court of Appeals, New York state’s highest court, held in Levittown v. Nyquist that the 26 words guaranteed all students the opportunity for a “sound basic education.” Building on that, the plaintiffs in the CFE case by 2003 had convinced the Court of Appeals to interpret a “sound basic education” as requiring the provision of “a meaningful high school education” that would prepare young people “to function productively as civic participants” with the “intellectual tools to evaluate complex issues such as campaign finance reform, tax policy, and global warming.”

In addition, the Court of Appeals held, “The State must assure [sic] that some essential [resources] are provided,” such as sufficient numbers of qualified teachers, appropriate class sizes, up-to-date books and supplies, suitable curricula, and a safe environment. Resources also should be “calibrated to student need,” and the opportunity for a “sound basic education” must “be placed within the reach of all students.” Rejecting research-based evidence to the contrary from Hoover Institution economist Eric Hanushek, the court held that the provision of additional resources would in itself result in improved student performance.

After examining the resources provided for educating New York City’s children and the educational results achieved, the court determined both were constitutionally inadequate and blamed the inadequacy of the state education finance system, deciding the problem was simply that the state was not providing enough money to the city.

Proposed Three-Part Remedy

Then, in a step that dissenting Appeals Court Justice Susan Read said “disregards the prudential bounds of the judicial function, if not the separation of powers,” the Court of Appeals gave the state 13 months, from June 2003 to July 30, 2004, to implement the following three-part remedy:

  • determine how much money is actually needed to provide a sound basic education to all New York City students
  • devise a funding approach to ensure every New York City school has the money it needs to provide the opportunity for a “sound basic education”
  • develop an accountability system to see if the new approach does actually “provide the opportunity for a sound basic education.”

When the legislature failed to meet the July 30 deadline, DeGrasse appointed the special masters panel to begin implementation of the court’s remedy.

“This dispute, like its counterparts elsewhere, is destined to last for decades,” predicted Read in her dissenting opinion, “and … is virtually guaranteed to spawn similar lawsuits throughout the State.”

Next month: How laws already paralyze New York City schools. For a preview, go to

George A. Clowes ([email protected]) is associate editor of School Reform News.

For more information …

Sol Stern provides an informative account of the lawsuit’s progress in “New York’s Fiscal Equity Follies,” City Journal, Spring 2004, available online at

The Web site of the Campaign for Fiscal Equity,, provides all of the court documents and rulings regarding the lawsuit.