In December 2004, it seemed that New York City schools' pocketbook woes might finally be at an end. For a decade, a coalition of city parents and education advocates had been battling Albany in state court over long-standing inequities in funding that had left New York City schools with only about $10,469 per student, as opposed to $13,760 per student in the neighboring suburbs.

In 2001, a judge had ruled that the state had a constitutional obligation to provide a "sound basic education," and ordered the legislature to boost funding to city schools, but the legislature didn't act. Now, the courts were promising to do what state senators and assembly members would not: In a ruling that cited Brown v. Board of Education, State Supreme Court Justice Leland DeGrasse declared that to fix the "systemic failure" of New York City's schools, he was ordering the state and city to pump an additional $5.6 billion a year into the city school system, effective immediately.

"We're ecstatic," Michael Rebell, then executive director of the Campaign for Fiscal Equity, which had filed the suit way back in 1993, told reporters. "Now we need to roll up our sleeves and make sure the legislature enacts this reform so that the children can get what they need."

David Cowles

Four years later, getting city schoolkids what they need is the least of educators' problems: Keeping what they already have, even, seems out of reach. After two rounds of mid-year cuts by Mayor Bloomberg and a doomsday budget from Governor Paterson, the city schools are looking at 2009 funding levels more than a billion dollars shy of what they had expected. The laundry lists of planned cuts from principals, presented on blogs like GothamSchools and InsideSchools, have become litany: "We are very scared as we will have to eliminate all after school programs and raise class sizes as we will have to eliminate about 5 positions." "Theatre, arts, and dance programs will have to be cut." The picture gets grimmer when you look ahead to next year; forward-thinking principals are realizing they'll have to cut full teaching positions, meaning entire classes will disappear into thin air.

This is not the post-victory landscape the people who waged the lawsuit imagined. The settlement was supposed to eliminate the money wars and instead, as Rebell put it, allow educators to roll up their sleeves and make those schools better. The final agreement carefully listed five proven methods to help inner-city kids do better in school, to ensure that the extra money was well spent. After 14 years of work, they weren't taking any chances.

And yet, here we are, about to spend the rest of the school year in another fight over not what programs the money should pay for (What kind of pre-K really works? How should we improve our standardized tests? Can we make the school day longer?), but where to get the money at all. How did this happen?

Wall Street's collapse and the city's generally horrific financial situation played a starring role, of course, but the Campaign for Fiscal Equity settlement had been ailing long before Lehman Brothers closed. Following DeGrasse's ruling, it took another two years of back-and-forth between the state and the courts before the funding would finally flow. Finally, in January 2007, newly elected Governor Eliot Spitzer proposed boosting state education funds to the city by $5.4 billion by 2011, building in the kind of programmatic specificity the lawsuit's filers had suggested. School districts would have to sign "Contracts for Excellence," vowing to use the windfall to improve one of five educational areas: teacher quality, length of school days, smaller class sizes, restructured middle and high schools, and full-day pre-K and kindergarten. (A sixth area, aiding students for whom English was not their first language, was later added.) Education Week glowingly called Spitzer's contracts "a test case" in holding school districts accountable in how they allocate new funds.

The first reports from the field were less rosy. First, it turned out that of the $700 million in extra funding the first year (under Spitzer's plan, spending increases would be slowly phased in over five years), only $228 million would be subject to Contract for Excellence restrictions. The rest trickled out through various loopholes—$60 million for charter schools, $38 million for "experimental" programs—and into other pots of money the school system was free to spend however it wanted.

While the city dutifully issued statements breaking down the remaining $228 million into the five contractual categories, there were numerous complaints of insufficient oversight over how the money was actually being spent. Rather than pouring the dollars into consolidated citywide programs targeted at improving teacher quality or lengthening the school day, the city left it up to principals to decide how to spend their tiny portion of the funds. The result was no comprehensive strategy for using the funds, and a paper trail that is, at best, patchwork and, at worst, unreliable: Principals only have to report their intentions, not how the money is ultimately spent.

"It's all over the place," says Rebell, now director of the Campaign for Educational Equity at Columbia Teachers College. "There's no way anybody can keep track of what's going on with that money, whether it's made any difference, whether it's being used well."

Where it is possible to measure what difference has been made, the results aren't encouraging. Take money aimed at making class sizes smaller, which at $153 million was the top item on the city's spending list. In 2007-08, the first year of the Contracts for Excellence, class sizes fell only gradually: less than half a student per class, well short of the goals the city itself had set as a target for the year. A State Education Department report found that in 70 schools that had gotten $100,000 or more in CFE money, class sizes had actually gone up; it ordered the city to "provide evidence of how Contract funds were used appropriately."

This year, the wheels came off. For grades K through 8, class size had gone up in every grade but one as of last October, according to city figures. "This is the second year of a class-size-reduction plan they said they were going to improve on," says Leonie Haimson, a Manhattan public-school parent who founded the aptly named Class Size Matters after, she says, her daughter's first-grade teacher confided that she "prayed for days when one or two kids were absent" so she could get some actual teaching done. "In fact, in K through 3 the gains were so large that it wiped out five years' worth of improvements in one year."

City education spokesperson Will Havemann says the October numbers aren't reliable, because they include students who are not actually enrolled in classes at those schools. New figures next month should show better results, he predicts.

Haimson calls this explanation "a lot of BS": In past years, the only levels that saw significant declines between October and January were for high schools, where kids were dropping out. (In a letter to State Education Commissioner Richard Mills, Haimson wrote: "We object to the notion that the DOE would try to claim credit for reducing class size that results from high discharge or dropout rates.") And, she calculates, even if class sizes come down by 1.25 percent, as the city predicts, that would still leave them higher than last year in every elementary and middle-school grade but two.

One problem with this area of the Contracts for Excellence is that, while Haimson, the teachers' union, and many parents want aid focused on class-size reduction, Bloomberg education officials have been lukewarm on the issue. They wrote a five-year plan for class-size reduction only under duress from the state, and they remain committed to the belief that their priorities should be elsewhere. Ivan Lafayette, a veteran state assembly member from Queens who quit last summer to work in the Paterson administration, recalled in 2007 urging city education Chancellor Joel Klein to start hiring more teachers to meet class-size goals. Klein's response, according to Lafayette: "If you have an excellent teacher it doesn't matter if she's teaching 28 kids or 21 kids."

The looming state and city budget deficits only threaten to make matters worse. Bloomberg, anticipating rough fiscal waters ahead, slashed $180 million from the city schools budget last February, and has proposed $385 million in cuts for the next school year. Paterson's 2009 budget promises to eviscerate schools funding, with $360 million in "deficit reduction assessment" cuts to basic city schools funding; the court-mandated CFE funds, meanwhile, scheduled to be $645 million this year, would be entirely "deferred" to as late as the year 2014, with no guarantees the money would rematerialize even then. "That's as good as being unconstitutional," says Rebell.

For now, everyone seems to be hoping that a deus ex machina will turn up to prevent the cuts from going through—a federal bailout of state education budgets, a "millionaire's tax" to raise revenue, gold doubloons discovered under the governor's desk. "I don't know how serious the governor is in the way he put forward this proposal," says Rebell. "He knows it's going to the legislative hopper. There's going to be a balance of increased taxes and cuts, and where exactly that balance is going to come out is the critical question."

One widely circulated proposal, pushed by the Working Families Party among others, is for a temporary state income tax surcharge on people earning over $250,000 a year, who currently pay the same 6.85 percent rate as New Yorkers with incomes of just $20,000. Rebell says a "full-court press" is needed for increased state funding, as well as "educational maintenance grants" from Washington to bail out state education budgets—a plan first floated by Ohio governor Ted Strickland early last year, and which has since gathered the support of Paterson and several other Democratic governors.

There's some hope this could work. The executive director of the Campaign for Fiscal Equity, Geri Palast, is serving as an adviser to Obama's transition team. But if federal help fails, Palast's deputies have said the Campaign could return to court. It's something that critics of the settlement say would not have been necessary if the court had retained more oversight of the increased schools funding. Rebell himself now says, "We had asked the court to retain jurisdiction for exactly this kind of reason, and they chose not to."

Haimson, for her part, wishes that Rebell and his cohorts had pushed harder. "Originally, the attorneys, in their wisdom, decided that there would be no controls over that money in any real sense—they had an idea that accountability meant meetings with the chancellor and public hearings, and all the rest. But public hearings alone don't have much force with these guys—they just ignore them." She argued, in an amicus brief, that the court should have made it a stipulation of the settlement that conditions in the schools actually change—not just that a certain amount of money be thrown at them.

When prison systems have been found to be illegally overcrowded, Haimson notes, courts have retained oversight until conditions are found to have improved. "The exact same argument could have been used" for city schools, she says. "It should not have been bait and switch, which is what it ended up being."

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