Is the end actually in sight?

Speaking to reporters on April 18, Michael Rebell, a lead attorney for the Campaign for Fiscal Equity, said the case seeking billions more in funding for New York City public schools could be drawing to a close.

The journalists listening might be forgiven for skepticism. The CFE case, as it is commonly known, has involved lawyers, politicians, educators and various wonks for 13 years. It began shortly after Rudolph Giuliani became mayor, as the Board of Education (now the Department of Education) struggled to find a new schools chancellor to replace ousted Joseph Fernandez (four chancellors ago), and when Robert Jackson served on a community school board in Manhattan. (He is now a member of the City Council, and heads the council’s education committee.)

Jackson and Rebell, frustrated by the shortages confronting that school district, launched the lawsuit in 1993. Since then, it has meandered its way through the court system and loomed over city and state budgets and decisions about school funding.

The last several weeks have seen more twists and turns, including the latest legal maneuver by Campaign for Fiscal Equity -- this one designed, it says, to force the city finally to ante up billions for city schools.

VICTORY FOR SCHOOL CONSTRUCTION, BUT...

This action comes in the wake of a substantial victory for school advocates -- a plan to get billions more for school construction in the city. But Governor George Pataki and the state legislature continue to resist providing billions more in operating funds for city schools. That resistance spurred the latest CFE action.

In his February, 2005, ruling in the CFE case, Judge Leland DeGrasse called for the city to receive an additional $5.63 billion in operating funds per year (on top of the existing budget , which is currently about $15 billion) in order to give all of its 1.1 million public school students “a sound, basic education.” He also said the schools would need an additional $9.2 billion for adding and improving facilities over a five-year period.

In late March of 2006, the legislature agreed to a plan that would provide the city with $11.2 billion for school construction over the next five years. But the legislature provided only $400 million in additional aid for operating expenses, prompting the latest CFE appeal.

THE CAPITAL FUNDS

When the year started, the two sides in the school funding dispute appeared as far apart as they had ever been. Pataki’s 2007 budget continued his policy of what his critics would call thumbing his nose at -– or, as his staff would put it, appealing –- the court ruling. He provided no funding for capital projects and boosted aid to New York City schools by $329 million – far short of the billions called for in the ruling.

For years, Mayor Michael Bloomberg, while saying the schools needed infusions of money from Albany, had been loathe to take on Pataki or the legislature. The mayor wanted the governor’s support for the ill-fated West Side stadium, some theorized; others thought he did not want to take on a fellow Republican. And some said Bloomberg preferred negotiating behind the scenes to making contentious public pronouncements.

But Bloomberg’s reticence faded after his re-election in November. In February reports began circulating that the mayor might work for the election defeats of key Republican state senators to punish them for not backing more school aid for New York City.

And then the mayor visited another plague on the recalcitrant politicians. The city has a five-year $13 billion plan (in pdf format) to build and improve school facilities. The city and state were supposed to share the tab. When Pataki did not come up with the state’s portion, Bloomberg announced he would be cutting 21 projects, targeting ones in key legislators’ districts. "We picked the schools where the people in Albany have some power," Bloomberg reportedly said in late February. "They're really not going to get away with this anymore."

Apparently not. Under the complex borrowing arrangement hammered out by the legislature, New York City would get $11.2 billion in school capital funds over the next five years. This would allow the city to restore the 21 threatened projects as part of its overall plan to construct or lease 76 additional school buildings, make repairs to old schools, improve science labs and provide for other renovations.

Although the state legislature and Pataki remain far apart on the overall state budget, the school funds appear safe. Pataki vetoed 202 items totaling about $3 billion in the legislature’s budget for fiscal year 2007, but did not touch the $11.2 billion for school construction or the additional operating money.

GODSEND OR GIMMICK?

School advocates have hailed the additional money for construction and improvements. “We’re very pleased,” said Noreen Connell, executive director of the Educational Priorities Panel. While “in an ideal world the legislature would have complied with the whole court decision,” she said, it makes sense to focus on physical improvements first. “You can’t reduce class size without new classrooms.”

Bloomberg commended the deal as an “excellent agreement” and applauded the “real and impressive leadership from Speaker Silver and Majority Leader Bruno, who rolled up their sleeves, got to work and found a way to deliver for our students."

But the funding plan worries some fiscal experts. The first part of the money – about $1.8 billion – would come from funds the state would borrow from the State Dormitory Authority. The rest -- up to $9.4 billion -- would come from borrowing done by the city through another public authority, the Transitional Finance Authority. The state would guarantee the new bonds and agree to provide enough future funding to sustain the bonding program.

Why such gyrations? The city and state governments themselves cannot borrow the money because of restrictions on government borrowing. Most importantly, the voters would have to approve it – and they might balk. After all, voters rejected a school bond act in 1997. But borrowing through the public authorities -- backdoor borrowing as critics call it -- avoids such pitfalls.

“It’s gimmicky,” Connell said. “But Albany is gimmicky.”

“This points out the need for debt reform,” said Elizabeth Lynam of the Citizens Budget Commission, a watchdog group. While agreeing that the schools need physical improvements, she said, “From the state’s perspective, it’s not a great deal because it’s going to add to the state’s debt, which is already jeopardizing the health of the state.”

THE OPERATING FUNDS

Some education advocates have concerns too. The Campaign for Fiscal Equity, in particular, charges the legislature and governor continue to flout the court’s ruling calling for additional billions to pay teachers and provide supplies. "Our schools need operating monies desperately,” CFE executive director Geri Palast has said, “and we will continue to press the case until the court-mandated operating aid starts to flow and the constitutional violation at the heart of our case is fully corrected."

And so the group has asked the state’s highest court, the Court of Appeals, to force the state to ante up. In its appeal, CFE requests an expedited hearing so the city can begin to see the additional money by the next school year. It wants the court to issue a clear order that the state must begin giving billions more to the schools. If the state still refused to act, the courts could impose sanctions, Rebell said.

The sanctions spring from one of the main frustrations of those fighting for more money for schools. Although the courts have repeatedly ruled in favor of increased funding, the state has dragged its feet, failing to address the issue in its budgets and continuing to file appeals. “The failure of the governor and the legislature to respect a clean mandate of this court...substantially undermines the rules of law and public respect for court orders,” the Campaign for Fiscal Equity said in its appeal letter. Now, the group hopes finally to get the money and, it says, end the case.

But it won’t be that simple. After the campaign announced its appeal, Pataki spokesman Scott Reif told the Albany Times-Union that the state might take legal action of its own. "The state's attorneys are reviewing whether we now need to file a cross-appeal to protect the state taxpayers' rights in light of today's unexpected action by CFE," he said.

The Campaign for Fiscal Equity’s request comes after another court decision -– this one in late March –- did little to clarify matters. The ruling by the Appellate Division, the court that has been most hostile to CFE’s arguments, left much room for interpretation. It said, on the one hand, that New York City schools need at least $4.7 billion a year more in state aid than they now get and another $9.2 billion in capital funds over the next five years. And, the judges said, the 2007 budget should reflect this. But then the court, by a 3-2 vote, went on to say that only the governor and the legislature, not the courts, could determine the exact amount of education aid.

Both sides declared victory. Governor George Pataki hailed the decision for reaffirming “the longstanding constitutional principle of separation of powers.” The Campaign for Fiscal Equity on the other hand, cheered too: “The court brushed aside the governor’s latest appeal, ruling that it is ‘undisputed’ that the state has failed to appropriate the amount of funding needed to meet the CFE mandate.”

Calling the decision “poorly drafted mind-blowingly muddled,” E.J. McMahon, director of the Manhattan Institute’s Empire Center for New York State Policy, wrote, “With his gift for ambiguity [Presiding Justice John] Buckley has done his part to ensure that all the lawyers involved in this case will be busy for years to come.”

Given the history of this case -- and the painfully long battles over school funding in other states -- McMahon could well be right.