Opinion ID: 2048181
Heading Depth: 1
Heading Rank: 7

Heading: The Issue of Rationality

Text: The $1.93 billion now embraced by the majority is, moreover, based on two unsustainable factors. When those factors are properly adjusted, the resultant cost of a sound basic education, as calculated by Standard & Poor's, is identical to that reached by the referees and accepted by the trial courta determination that should therefore be upheld as rationally based. In conducting its study, Standard & Poor's, as instructed by the Commission, utilized the successful schools and districts model for calculating per-pupil expendituresone of three distinct methodologies typically used by experts in education policy and finance. No party disputes the legitimacy of the successful schools method as a means for determining the cost of a sound basic education. By using this method, Standard & Poor's was able to calculate a range of numbers that varied according to choices made as to four distinct factorsfirst, the standard for measuring a successful school district; second, the additional expenditures necessitated by special needs students; third, the use of a cost filter; and fourth, the manner of converting standardized education dollars into New York City dollars. With respect to the first factor, Standard & Poor's made a set of calculations using four different academic achievement standards for identifying a successful school district, and again the parties agree, and the referees found, that satisfaction of the Regents Criteria provides an appropriate standard for measuring a successful school. Nor is there any dispute as to the fourth factorthe proper conversion of state education dollars into New York City dollars. Inasmuch as the purchasing power of a dollar varies across the state, and the successful schools method examined all of the school districts in the state, Standard & Poor's offered two alternative regional cost adjustment indices to determine the cost in New York City dollars: (1) the New York Regional Cost Index, provided by the State Education Department; and (2) the Geographic Cost of Education Index (GCEI), provided by the National Center for Education Statistics. The referees found, and the parties agree, that use of the GCEI was appropriate. [4] The differencea huge dollar differencecenters on the second and third factors: the proper weighting adjustments for special needs students, and the use of a 50% cost reduction filter.
A successful schools analysis produces base expenditures, which are estimated costs per pupil. However, such base expenditures must then be multiplied by weightings for students with special needs, who require such costly accommodations as differentiated curricula, smaller class sizes, assistive technology and classroom aides. Standard & Poor's assigned a weighting of 2.1 to students with disabilities (special-education students); 1.35 to economically disadvantaged students; and 1.2 to students with limited English proficiency. Although the parties and referees agree that the special-education and English-language weightings were appropriate, the record reflects that the 1.35 low-income weighting applied by Standard & Poor'saccording to which $1.35 must be allocated to students in poverty for every dollar spent on a student not in povertywas irrational and cannot be sustained. Defendants' principal rationale for choosing this weightinga choice that drew considerable criticism from the witnesses and amiciwas that the Standard & Poor's study had identified 1.35 as the proper adjustment for educating economically disadvantaged students. But Standard & Poor's had in fact emphasized that 1.35 was simply a figure that it had drawn from a review of research literature on the coefficients that education agencies tend to use in practice, and that insufficient empirical evidence exists in New York to determine how much additional funding is actually needed for different categories of students with special needs to consistently perform at intended achievement levels (Standard & Poor's School Evaluation Services, Resource Adequacy Study for the New York State Commission on Education Reform, at 8-9 [2004]). [5] As a result, Standard & Poor's made clear that its study does not explicitly recommend a particular set of weightings. ( Id. ) Unlike Standard & Poor's, the Regents, in determining that a higher poverty weighting was required, had focused on the specific circumstances of New York City schools, including an especially heavy concentration of high-needs students, very low graduation rates, large classes and a disproportionate number of schools in need of improvement, and thereby determined that the appropriate low-income weighting for New York City was 1.8. With respect to the state as a whole, the Regents recommended weightings for low-income students ranging from 1.5 to 2.0, depending on the concentration of poverty in the district. Because the Standard & Poor's weighting of 1.35 for low-income students was not focused on the specific circumstances of New York City schools, its use to determine the actual cost of providing a sound basic education to economically disadvantaged New York City students was irrational, as the referees found. The referees thus properly determined that a poverty weighting of at least 1.5the lower end of the range proposed by the Regentsmust instead be used.
Finally, as endorsed by the Zarb Commission, Standard & Poor's applied a cost effectiveness filter of 50% in an alleged effort to screen out successful school districts that either spent money inefficiently or spent more than was necessary to provide the opportunity for a sound basic education. Under that approach, Standard & Poor's considered the average expenditures of only the lower-spending half of successful school districts in New York State, thereby excluding from the analysis 140 of the 281 successful school districts meeting the Regents Criteria standard. Multiple witnesses and amici heavily criticized this filter. Indeed, several testifying witnesses criticized the use of any cost reduction filter, and others would have used an approach substantially different from the one adopted by defendants, such as simply eliminating the highest- and lowest-spending 5% of districts as outliers. Defendants' own expert, Dr. Robert M. Palaich, testified that his own firm would not use the 50% filter, and there was no evidence offered that this filter is generally accepted by experts in educational finance or, more fundamentally, that the higher-spending districts that were excluded from defendants' analysis by the cost filter were in fact inefficient. Inasmuch as defendants made no attempt to determine why some successful schools spent less per pupil than others, the assumption that this must have been because the lower-spending schools were more efficient is utterly speculative. Indeed, certain expert amici posited that the lower spending in the selected schools might instead have been due to low wage costs and a low concentration of disadvantaged students, not to efficiency. Only one decisionmaker anywhere in the countrythe New Hampshire Legislaturehas ever implemented a 50% cost reduction filter. But as even defendants acknowledge, in New Hampshire it appears that the efficiency factor was selected to drive costs down to a predetermined amount; it was not based on the expertise of any education finance experts. The 50% number not only is wholly arbitrary, but also has the effect of eliminating most of the school districts in Westchester and Nassau, the two counties that border New York City and thus most resemble the City in the concentration of students who are not English proficient and in the higher regional costs, particularly in hiring and retaining capable teachers. Accordingly, the 50% cost filter was properly rejected by the referees. Defendants nevertheless defend the use of the 50% filter on the ground that the State Board of Regents also used it in its own budget proposal, submitted to the referees. But if deference to the Regents is called for with respect to the cost filter, surely it must also be shown with respect to the appropriate poverty weighting. The Regents, as noted, recommended a weighting for New York City low-income students of 1.8. Application of a 1.8 low-income weightingeven with the 50% cost filterwould result in a resource gap of $5.25 billion, almost identical to the $5.26 billion gap found by the referees. [6] Notably, the Governor proposed additional annual New York City spending of $4.7 billion; the Regents proposed $4.7 billion from the State, plus $0.9 billion from the City, for a total of $5.6 billion; and New York City proposed $5.3 billion. Plainly, every governmental actor knew what the referees and the Appellate Division here concluded: A sound basic education will cost approximately $5 billion in additional annual expenditures. I remain hopeful that, despite the Court's ruling today, the policymakers will continue to strive to make the schools not merely adequate, but excellent, and to implement a statewide solution. Order modified, etc.