Fiscal Brief

New York City Independent Budget Office

School Tax Relief and Education Aid
Proposals: Impacts on New York City

The Independent Budget Office (IBO) has analyzed three separate proposals presently under consideration in Albany that would provide property tax relief and school aid reform. The Governor’s School Tax Relief (STAR), Senate Bill 1 (S.1), and Assembly Bill 7530 (A.7530)—which includes the Learning, Achieving and Developing by Directing Educational Resources (LADDER) plan—are the proposals under consideration. IBO finds that:

Independent Budget Office
April 1997


Three proposals to provide local school property tax relief and additional education aid to localities across the State are presently under consideration in Albany. In January, the Governor announced the School Tax Relief (STAR) program. In March, the State Senate passed Senate Bill 1 (S.1), the School Tax Relief, Fiscal and School Budget Reform and Taxpayer Accountability Act of 1997. Most recently, the Assembly passed its budget bill (A.7530) which includes the Learning, Achieving, Developing by Directing Educational Resources (LADDER) program as well as other school aid and tax reduction initiatives.

There are significant differences among the three plans. The combined benefits of the tax cut and additional education aid under STAR and S.1 are considerably smaller for New York City than for the rest of New York State, while the impact of the Assembly’s plan on the City is uncertain. City homeowners would receive only 8.6 percent of the $1.8 billion in total statewide tax savings under either the STAR or S.1 programs. Moreover, neither of these two programs would raise the City’s share of State education aid to a level commensurate with its share of enrollment. The A.7530 proposal could succeed in bringing the City its equitable share of State aid, but only if nearly half of the new funds made available by the plan are allocated to the City. Figure 1 provides a summary of the impact of the three proposals on the City.

This fiscal brief analyzes the major components of these three proposals and their potential impact on New York City. It begins with an analysis of the property tax exemption included in the STAR and S.1 proposals, follows with a review of the school aid components of the three initiatives, and concludes with a discussion of how the City fares under each.

Property Tax Exemption

The proposals offered by both the Governor and the Senate would create a new homestead exemption that reduces the property tax burden for resident homeowners. Low and moderate income senior citizen homeowners would receive a larger exemption under the proposals. The exemption would lower the property tax revenue directly collected by local school districts and lost revenue would be replaced with new funds distributed from Albany. Replacement funding would come from a pool of lottery proceeds and other dedicated revenues that have not yet been specified.

If the proposed exemption is fully implemented, IBO estimates that it would save City homeowners $156 million. Senior citizens would receive $39 million and other homeowners would receive $118 million. In all, 720,000 New York City homeowners would benefit from the exemption.

Total savings to City homeowners would be only 8.6 percent of the $1.8 billion in statewide savings.1 By comparison, the Governor’s Office has indicated that the City’s share would be 12 percent or $218 million. Either estimate of the City’s share of the tax expenditure is disproportionately low when compared with the City’s share of statewide education funding raised from local sources. The City accounts for over 28 percent of the more than $12 billion in revenues collected by school districts across the State. Furthermore, the STAR exemption would exacerbate inequities in the City’s current property tax structure.

How the exemption would work. The exemption would be limited to resident-owners of one-, two-, and three-family homes, and co-op and condo apartments.2 The full benefit of the exemption would be phased in over four years beginning in State fiscal year (SFY) 1997-98. In the first year, only those homeowners who are age 65 or older with incomes of less than $60,000 would qualify. In the following years, all other resident-homeowners would also qualify. By 2001, the exemption would reduce the education portion of property taxes for the median priced home in a county by 45 percent for qualifying senior citizens and 27 percent for all other homeowners.3 Within each county—the five counties of New York City are treated as one—the dollar value of the exemption would be the same for all qualifying homes. Thus, the percentage reduction in property taxes is higher for those homes with values below the county median home price and lower for homes with values above the median.

Although the percentage reduction for the median priced home would be the same for all counties, the fixed dollar value of the proposed exemption would vary for each county because property tax burdens vary widely across the State, reflecting differences in property values and assessment practices. To compensate for these variations, the dollar value of the exemption in each county is determined by first adjusting for the difference between median home prices in the county and median home prices throughout the State, and then adjusting for the county’s equalization rate—the average fraction of full market value used in setting tax assessments.4

How the estimates were derived. The City’s property tax data files do not indicate whether a property’s owner actually resides in the house, nor do they indicate the age and income characteristics of owners or tenants. Therefore, determining the number of properties that would qualify for the proposed exemption requires independent estimates of these characteristics.5 IBO developed separate estimates of the benefits flowing to conventional homes and to co-op and condo apartments. For Class 1 properties, the share of homes with a resident-owner and the share of resident-owners who qualify for the senior citizen exemption was derived from the 1993 Housing and Vacancy Survey (HVS).6 The shares were then used to select a simulated population of qualifying properties from the City’s property tax assessment data file, and this population was used for modeling the cost and distributional effects of the proposed exemption. For co-ops and condos in Tax Class 2, the number of owner-occupied units was based on estimates prepared by the New York City Department of Finance in conjunction with the recently enacted co-op and condo tax abatement program. The share of qualifying senior citizens was determined from the HVS.

New York City taxpayers’ share of statewide savings. The City’s disproportionately small share of the tax cut is due to several factors. The first factor is the City’s tradition of maintaining low effective tax rates on one-, two-, and three-family homes. The City’s Class 1 effective tax rate, which measures the relationship between property taxes paid and a property’s market value, is much lower than in the surrounding suburban counties and elsewhere in the State. Given that the exemption is designed to yield a 27 percent reduction (45 percent for qualifying senior citizens) in school taxes for the average home statewide, the City’s lower tax burden means that the dollar value of the exemption is smaller when compared to areas with higher effective tax rates.

For individual City homeowners, IBO estimates that the fully implemented exemption would yield a tax savings of $197. For qualifying senior citizens, the savings would be $329. By comparison, the Governor’s Office has estimated that in Westchester County, which has much higher effective tax rates than the City as well as higher median home values, the savings would be $1,130 ($1,890 for seniors), with savings almost as high in Rockland, Nassau, and Suffolk Counties.

A second factor behind the City’s disproportionately small share of the tax cut is that New York City, even more than most urban areas, has a very low percentage of residents who own their homes. In 1996, 33 percent of City households owned their own home. The statewide figure (which includes the City) is 52.7 percent.7 With the exemption limited to homeowners, a majority of City residents receive no benefits. Aside from the intracity equity issue posed by this exclusion (see below), it has the immediate effect of depressing the City’s share of the tax expenditure since there are comparatively few residents who would be eligible to receive it.

Intrastate equity. Because the City uses property tax revenues for other purposes besides funding education, City homeowners would receive a smaller reduction in their property tax burden than would homeowners elsewhere in the State. In recent years the education portion of the levy has been approximately 46 percent. In contrast, in most other communities, school districts levy a specific school property tax dedicated solely to education financing. Since the proposed exemption would only reduce school taxes, City taxpayers would receive a benefit only against the school portion of their total property tax bill.8 Thus, while the school tax portion would be reduced by 27 percent for the median value Class 1 home, the percentage reduction in the total property tax burden is only 13.2 percent.9

The City’s current tax structure and its mix of funding sources for education are the products of choices made by the City’s leaders over many decades. These choices have produced a system that does not dedicate its entire property tax capacity to fund education, while at the same time uses other tax revenues—including a personal income tax—to fund a portion of education spending. If the goal of the property tax exemption was to reduce the burden of all local taxes supporting education, rather than just the school property tax, then the City’s share of the benefits should approach its 28 percent share of local education spending.

Intracity equity. The proposed exemption also raises a number of intracity equity issues. First, it would further widen the tax burden gap between residents who own their homes and renters who would receive none of the benefits of the exemption. Rental apartment buildings, like all properties in the City, are subject to the property tax. In a tight rental market such as New York City’s, most of the property tax burden on rental buildings is borne by tenants in the form of higher rents. Moreover, the tax burden being passed through to City renters is much higher than the burden on Class 1 homes and on co-ops and condos. The City has estimated that the effective tax rate for large rental buildings is 5.9 times higher than for Class 1 properties and more than double the rate for co-ops and condos.10 Because the effective tax rate for homeowners would be lowered under the proposed exemption, the rate for large rental buildings would be 6.7 times higher than for Class 1 homes. This inequity is compounded by the fact that renters generally have lower incomes than home owners. By denying the benefit of the exemption to the tenants living in the City’s 1.75 million rental apartments, the proposed exemption would exacerbate the disparities in the City’s tax treatment among different types of residential property and heighten the overall regressivity of the property tax.11

Another equity issue arises from differences in the treatment of homeowners and of co-op and condo owners. When the Governor initially introduced the STAR exemption in his January budget announcement, cooperatives were excluded from eligibility. He subsequently included them in an amendment to the budget. However, while co-ops are now eligible, the benefits available to them—and condos as well—are much less generous than those for Class 1 homeowners.

For Class 1, the non-senior citizen exemption is designed to yield a reduction of 27 percent for the median priced home in each county in the State. This reduction is accomplished by applying the sales price and equalization adjustment factors described above. However for co-ops and condos, different adjustments are used that yield the same dollar benefit as for Class 1 instead of the same percentage benefit.12 Since co-ops and condos have higher effective tax rates, the benefit in percentage terms is much lower. When fully implemented the average reduction for co-ops and condos would be less than 5 percent in Manhattan and less than 10 percent in the other boroughs of the City.

Correcting these two inequities would require either increasing the cost of the exemption by hundreds of millions of dollars or scaling back the benefits for conventional homeowners.

The Assembly bill also contains an initiative to provide school tax relief, although no details on the form of the relief are specified. The bill includes a commitment to provide $650 million in tax relief for State residents in the coming fiscal year, with no indication that the tax reduction would extend beyond one year or of how the benefits would be distributed. Given the lack of details, it is not possible to estimate the impact of the tax relief or the City’s share of the benefits.

Education Aid

Although New York City currently educates 37.2 percent of children in New York State, the City receives $3.4 billion, only 34.8 percent of the State’s $9.8 billion in total school aid.13 This disparity between the City’s share of total school aid and its share of statewide enrollment has been at the core of a debate surrounding the equitable allocation of State education aid. The impact of the proposals presently under consideration in Albany will be assessed using 37.2 percent as the benchmark for evaluating whether the City receives its equitable share of total school aid.14

STAR, S.1, and A.7530 approach increasing school aid differently. The Governor’s Office has indicated that STAR would provide new funding above current school aid levels, while Senate 1 provides a financial incentive for districts that freeze or reduce local funding for education. However, neither of these plans include increases in general operating formula aid.15 In contrast, the Assembly’s budget bill A.7530 combines general operating formula aid increases with additional funds for specific education programs. The school aid increases in all three programs would be funded through the State's general fund.

It is far from certain that any of these school aid increases would ever materialize for the City. STAR was introduced in the Governor's budget bill, which has not been adopted by either the Senate or Assembly. S.1 and A.7530 have each passed their respective houses, but must obtain bicameral approval in order to reach the Governor's desk.16 In each of the plans, the increased aid would require annual appropriations and the largest increments are slated for the out-years of the program. Moreover, the State’s ability to provide the new aid promised to the City in these initiatives depends on a number of factors including the future fiscal health of the State, a continued commitment to education, and political considerations.

IBO used its current services baseline of school aid to compare the three initiatives. The school aid baseline was used to account for enrollment and inflation growth while holding current law and policy constant.17 In evaluating the impact of the initiatives on the City, IBO's baseline was adjusted to reflect proposed increases in aid in order to estimate the City's share of total State education aid. The IBO baseline was also used to distinguish increases due to legislative policy changes from the enrollment and inflation driven increases under current law.


When fully implemented, STAR would provide $1.7 billion in school aid for New York State school districts in 2001-02. The Governor’s Office estimates that New York City would receive $682 million in additional aid to eliminate the gap between the City’s share of aid and its share of statewide enrollment.

Under STAR, only aid for textbooks and computers would be increased for the upcoming school year. However, it is not clear that these increases represent new spending. Funding for computers and textbooks is traditionally provided through State school aid formula funds. Since the Governor’s plan does not increase the current law general operating aid formula, it is not clear whether STAR provides new money or simply supplants projected increases in baseline spending. To the extent that any of the aid increases under the STAR initiative are attributable to enrollment and inflation-driven growth in the baseline, the net value of the program would be lower than the $1.7 billion estimated by the Governor. Moreover, legislation defining the mechanism for distributing any new money for the purposes of increasing equity for the City under STAR would not be introduced until next year. This further adds to the uncertainty of the proposal from the City’s perspective.

Even if STAR does represent entirely new money, IBO’s analysis indicates that it would not be sufficient to eliminate the gap between the City’s share of aid and its share of statewide enrollment. In fact, IBO projects that the City’s share of total State aid would peak at about 35.7 percent in 1999-00 and decline to 35.5 percent in 2001-02. Funding for STAR would have to be increased by about $200 million to bring the City to its equitable share of State aid.

Senate Bill 1

Under S.1, school districts could receive additional State aid if they were to freeze (or reduce) their locally-funded support for education or lower their administrative costs. When fully implemented, S.1 would provide $1.2 billion statewide in additional school aid for those districts that qualify for the program. In most communities across the State, including the City, additional aid would be equal to 3 percent of a district’s prior year operating budget. For the City to qualify for additional aid, it would have to freeze the local funds component of its education budget.18 School districts would also be required to submit five-year education and financial plans to the State Education Commissioner for approval before a district could qualify for the new aid.

IBO estimates that in 2001-02, the City would receive $274 million in additional education funds but only if it elects to participate in S.1 and freeze the City funded portion of the education budget. However, the net effect of the new aid combined with the freeze would be to slow the growth of total education spending in New York City. If the City does participate in the program, IBO estimates that City education spending would total $9.4 billion in City fiscal year 2002. By comparison, if the City chose not to participate in S.1, IBO estimates that City education spending would grow to $9.9 billion in 2002.19

SOURCES: Independent Budget Office; New York State Governor’s Office; New York State Senate; New York State Assembly.
STAR City school aid figures are from New York State Governor’s Office. S.1 and A.7530 school aid and City tax relief are Independent Budget Office estimates.
NOTES: a. Legislation defining the mechanism to allocate out-year increases is not expected to be drafted until next year.
b. This analysis assumes New York City qualifies and chooses to participate in the S.1 tax freeze incentive program.
c. A.7530 proposes statewide property tax relief of $650 million in 1997-98. No detail was available for this analysis.
d. The exact amount of additional aid to the City is unknown. The amounts shown illustrate the funds necessary to bring the City’s share of total State aid proportional to its current enrollment by 2001-02.

In order to determine whether to participate in S.1, the City and the Board of Education would have to weigh the additional aid against the impact of lower education spending. If the City does participate in the program, then over $600 million of City funds that would otherwise have been part of the education budget would become available for tax reductions, spending on other services, or gap closing initiatives.

Unlike the Governor’s STAR proposal, S.1 is not intended to redress the current inequities in the State’s school formula aid, and indeed it would not do so. If the City does choose to participate, IBO estimates that its share of total school aid would actually decline to about 32 percent by SFY 2001-02.20 To bring the City share up to 37.2 percent by the fifth year, IBO estimates that about $400 million beyond levels currently proposed in S.1 would be necessary. However, if the City chose not to participate in the program, it would fall even further behind in its share of State school aid.

Assembly Bill 7530

The Assembly has estimated that statewide school aid would increase $5.8 billion by 2001-02 under the initiatives included in A.7530. The bill incorporates the $1.9 billion LADDER plan and other specific aid programs, along with $3.8 billion in additional general operating formula aid. The Assembly has indicated that the additional funding would bring the City’s share of total school aid to 37 percent by the fifth year of the program.

The LADDER plan provides aid for several specific programs including: pre-kindergarten; full-day kindergarten; class-size reduction; maintenance and repair; and textbooks and computers. LADDER differs from the other two plans in that it proposes categorical aid programs for new purposes, most notably $1 billion annually by 2001-02 for universal pre-kindergarten.21

The Assembly’s estimate that general operating formula aid would grow by $3.8 billion includes increases driven by enrollment and inflation growth that would occur under current law. To distinguish between increases due to new policy initiatives and current law baseline growth, IBO compared its projection of baseline State school aid with the Assembly’s estimated increase in general operating formula aid. This analysis finds that $1.8 billion of the $3.8 billion increase in general operating aid projected by the Assembly is attributable to changes in the aid formulas.22 The remaining $2 billion increase would occur under the current law formulas in response to projected enrollment growth, inflation, and other factors between now and 2001-02.

Thus, IBO estimates that the new school aid attributable to changes in policy under A.7530 would actually be $3.7 billion. This is the sum of the $1.9 billion in new programs and the $1.8 billion increase attributable to changes in school formula aid.

The bill provides insufficient detail to estimate the City’s share of the new benefits. Thus, IBO has calculated how much of the projected $3.7 billion in new spending would have to go to the City in order to increase the City’s share of total education aid to 37.2 percent by the fifth year of the program. This would require significant increases in school aid for the City.23 Of the new aid made available by A.7530, the City would require $1.6 billion—or 45 percent of the projected statewide total—in order to achieve school aid equity in year five of the plan.

Conclusion: How the City Fares

In determining how the City fares, IBO estimated the share of total State benefits flowing from each of the proposals. For this purpose, the tax exemption component of STAR and S.1 is treated as additional State spending, since localities would be reimbursed by Albany for the local revenue lost to the exemption.

The benefits to City homeowners from the proposed homestead exemption are identical under STAR and S.1. IBO estimates that when fully implemented, the proposed exemption would save City homeowners a total of $156 million—$39 million for senior citizens and $118 million for all others. Total savings for City homeowners represent only 8.6 percent of the $1.8 billion in savings statewide, although the City accounts for 28 percent of the statewide total of local funds supporting education. If the goal of Albany lawmakers is to use statewide resources to reduce the local burden of supporting education, one would expect to see the City’s share of the benefits from such an initiative approach 28 percent. The proposed exemption, using a structure that disregards crucial differences between the City and the rest of the State, falls far short of that target.

The proposed tax exemption under STAR and S.1 would also worsen current inequities in New York City’s property tax system. The already wide disparity in tax burdens gap between renters and homeowners would grow. Given that renters generally have lower incomes than homeowners, their larger relative tax burden would add to the regressivity of the property tax. Moreover, because the proposed exemption gives co-op and condo owners a smaller percentage reduction in taxes than homeowners, the disparity in property tax burdens between one-, two-, and three-family homes and co-op and condo apartments would grow.

The Governor’s office projects that under the STAR plan, the City could receive an additional $682 million in annual school aid by 2001-02. If it all became available to the City, this new aid would increase the City’s share of State aid to 35.5 percent, roughly $200 million short of achieving school aid equity at the end of the plan’s implementation period.

Total new State spending for the City under STAR would be $838 million annually—the sum of the tax exemption benefits and the new aid—once the plan is fully implemented. This accounts for only 24 percent of the $3.5 billion total cost to the State, considerably short of either the City's share of local education spending (28 percent) or the City’s share of total enrollment (37.2 percent).

Under S.1, the City could potentially receive $274 million in new school aid each year once the plan is fully implemented. This sum would not be sufficient to remove the existing disparity between the City’s share of school aid and its share of total enrollment. Furthermore, a requirement that the City freeze its own spending to qualify for the new aid makes it questionable that the City would participate and thus receive any benefit. If the City does participate, the total combined value of the tax exemption and the new State aid under S.1 would be about $430 million—14 percent of the total $3 billion combined statewide program. If the City chooses not to participate, then new State spending for the City would be only $156 million. This would amount to five percent of the statewide total.

Although the Assembly budget bill A.7530 proposes $650 million in property tax relief for the coming fiscal year, details of how it would be implemented have not been released. Therefore, the share of the tax benefits flowing to the City can not be determined for this analysis. Although the Assembly provides no detail on how school aid equity would be achieved, their plan could potentially increase the City’s share to 37.2 percent provided that the City receives 45 percent of the new school aid in the fifth year of the initiative.

Work Products by The Independent Budget Office

School Tax Relief and Education Aid Proposals: Impacts on New York City
April 1997
Interactive Tax “Receipt” Service (IBO web site)
April 1997
Analysis of the Mayor’s Budgetary Proposals
March 1997
New York City’s Fiscal Outlook
February 1997
Inside The Budget (Newsfax)
Issued bi-weekly since January 1997
IBO Analysis of Board of Education Funding Trends
January 1997
The Fiscal Impact of the New Federal Welfare Law on New York City
October 1996
The Clean Water/Clean Air Bond Act of 1996: Fiscal Impact on New York City
October 1996
The Independent Budget Office: Enhancing Official and Public Understanding of the Budget
May 1996

Forthcoming Work Products

Report on the Mayor’s Executive Budget
May 1997
The Mayor’s Tax Program: Re-Pricing and Review
May 1997


1It is important to note that unless the intent of these proposals is to lower total education spending by the State, lottery revenues diverted from education aid will have to be made up with funds from other statewide sources. Because City residents and businesses are the source for roughly 45 percent of State general fund revenues, they would contribute far more to funding the property tax reduction than they would reap in benefits.
2New York City's properties are divided into four classes for property tax purposes. One-, two-, and three-family homes are in Class 1. Most co-ops and condos are in Class 2.
3If all the sales prices were listed in ascending order, the median would be the value exactly at the middle of the list, with half of the prices lower than the median value and half higher.
4Material released by the Governor's Office indicates that their estimate of the sales price adjustment factor for the City is based on a median sales price of $160,000. With a statewide median of $110,000, the sales price adjustment factor for the City is 1.45. In contrast, IBO's analysis of New York City Department of Finance data indicates that the average median sales price for the last three years is $179,300, which yields a sales price adjustment factor of 1.63. This higher adjustment factor means that the dollar value of the exemption in the City would be larger than estimated by the Governor's Office. In this Fiscal Brief, IBO's estimates are based on this higher exemption amount. In S.1, the data source for the statewide median used to set the sales price adjustment factor each year excludes all sales from New York City. Given the higher prices in the City compared with most other communities in the State, this has the effect of lowering the statewide median. The lower median makes the City's adjustment factor higher, which in turn makes the dollar value of the exemption for City homeowners larger.
5It is likely that differences in these estimates account for the differences between IBO's estimate and the Governor's.
6U.S. Bureau of the Census, 1993 New York City Housing and Vacancy Survey Longitudinal Microdata File.
7U.S. Bureau of the Census, Housing Vacancy Survey, Annual Statistics: 1996, Tables 13 and 14.
8In the S.1 legislation, the exemption is calculated using either the school portion of the total levy or 50 percent of the total tax, whichever is greater.
9Elsewhere in the State, the total property tax levy can include village, town, county, and other charges, although in most communities the school tax still accounts for most of the levy. Thus, the reduction in total property tax burdens elsewhere would be much closer to 27 percent than it would be in the City.
10Although co-ops and condos are included in Class 2 along with rental apartment buildings, their assessments, and thus their effective tax rates, are artificially depressed under provisions of the property tax law. Final Report of the New York City Real Property Tax Reform Commission, December 30, 1993 and Appendix C; New York City's Fiscal Outlook, Independent Budget Office, February 1997, pp. 30-34.
11Renters in two- and three-family homes—assuming that the owner also resides in the building—would benefit from the exemption to the extent that their rents reflect the lower property taxes paid by their landlord.
12The equalization adjustment factor used to calculate the proposed exemption for co-ops and condos does not use the Class 2 equalization rate, which is nearly 35 percent, but rather the Class 1 equalization rate, approximately 7.5 percent, with only a slight adjustment for the differences in tax rates. Furthermore, the median sales price adjustment is based on data that excludes Class 2 sales. A sales price adjustment based on the ratio of City co-op and condo sales to statewide co-op and condo sales would likely be higher than the one derived from the ratio of Class 1 sales.
13City enrollment is expected to grow at a faster rate than statewide enrollment over the next five years. Thus, it is likely that the current 37.2 percent enrollment benchmark will understate the funds needed to achieve school aid equity over the long term.
14The State provides an additional $1 billion in other categorical education grants for a number of programs including teacher support aid, categorical reading, and magnet schools. These grants are not allocated by formula, and indeed the City receives only about 20 percent of the statewide total. If these grants were included in the analysis, the City's share of school aid would fall by about one percentage point. In this Fiscal Brief, IBO uses "total school aid" or "total education aid" to denote school aid exclusive of these categorical grant programs.
15General operating formula aid is a subset of total state formula aid. It accounts for the largest portion of formula aid. In this Fiscal Brief "general operating formula aid" refers only to that specific component, while "school formula aid" denotes total formula-allocated aid.
16S.1 and A.7530 are examples of "one-house bills," which usually serve as starting points for negotiated compromises.
17This analysis uses two different baseline projections of State aid, one for the City and one for the rest of the state. The City school aid current services baseline was developed using econometric modeling of the effects of inflation, enrollment and other variables over time. The statewide school aid projections were derived by assuming that current services education spending will grow at the same rate as in New York City. See New York City Independent Budget Office, Analysis of the Mayor's Budgetary Proposals (March, 1997), pp. 20-22 and 30-31.
18The portion of the budget that localities must freeze excludes debt service for capital spending. In addition, spending associated with enrollment growth greater than 3 percent would not be counted against the "freeze" level. In recent years, however, City enrollment growth has been about 2 percent per year.
19IBO, Analysis of the Mayor's Budgetary Proposals(March 1997), pp. 30-31.
20The exact City share would depend on how many other school districts chose to participate and the size of their budgets.
21In comparing STAR, S.1, and A.7530, this is an important distinction. STAR and S.1 provide additional funds for existing programs, while a portion of the new aid under LADDER funds expansion of the services provided by school districts.
22There are two caveats to this estimate. First, because it was not possible to model the effects of the bill's changes to the school aid formula, the share of the $3.8 billion increase in formula aid attributable to policy changes was computed as the residual of the Assembly's estimate of increased formula aid and IBO's projected growth in baseline aid. Second, because our estimate relies on the residual between projections made by two different groups (IBO and the Assembly), differences in the assumptions driving either group's baseline projections may affect the impact attributed to policy changes.
23IBO's analysis assumes that the City's share of statewide school aid would be increased from its current 34.8 percent to the target of 37.2 percent in a linear fashion over the five-year course of the program.

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