New York City’s Department of Education operates on a $44.6 billion budget for the 2025–2026 school year, the largest school district budget in the country, serving roughly one million students across more than 1,800 schools in the five boroughs.1NYC Public Schools. Funding Our Schools2Office of the New York State Comptroller. Issues Facing New York City’s Agencies: New York City Department of Education This breakdown of the NYC DOE budget walks through where those dollars come from, how they reach individual schools, and what they actually pay for.
Where the Money Comes From
Three revenue streams fund the DOE, and the mix shifts year to year with state aid negotiations in Albany and the availability of federal grants.1NYC Public Schools. Funding Our Schools City tax levy funds are the largest piece, drawn primarily from property taxes and personal income taxes collected across the five boroughs. State aid follows, delivered mainly through Foundation Aid, which is calculated based on district wealth and student demographics. Federal dollars make up the smallest share, flowing through programs like Title I that target schools with high concentrations of low-income students.
One federal constraint matters a great deal to the size of the budget. Under the Individuals with Disabilities Education Act, local districts must budget at least as much in local or state-and-local funds for special education each year as they spent the prior year.3New York State Education Department. Individuals with Disabilities Education Act Maintenance of Effort Guidance Falling short can mean losing eligibility for the federal grant or being required to repay funds from non-federal sources. For a system this large, that creates a floor the city cannot cut below without serious financial exposure.
How Dollars Reach Individual Schools
Most of what principals have to work with arrives through a weighted formula called Fair Student Funding, which has accounted for about 57 percent of the average school’s total budget in recent years.4Independent Budget Office. Whats in a Weight – Budgetary Impacts of the Fiscal Year 2024 Fair Student Funding Formula Changes The formula begins with a per-capita base amount recalculated each year to track the citywide average teacher salary. For 2024–2025 that base was roughly $4,254 per student.
The formula then layers additional weights on top for students who cost more to educate. English language learners, students in temporary housing, and students performing well below grade level all generate extra dollars for their school. Special education weights scale with the intensity of services a student receives.5Independent Budget Office. What is Fair Student Funding A fourth grader who receives special education services and is struggling academically might carry a combined weight above 3.0, meaning the school receives more than three times the base amount for that child.
Allocations are calculated in the spring based on projected enrollment and reconciled against actual headcounts after the fall audit. Principals spend the money mainly on staffing and classroom materials, but hiring decisions must stay within citywide personnel rules and existing union contracts. Full funding of the formula was not consistently achieved for years, and whether schools actually receive 100 percent of their formula entitlement has been a persistent question.
Where the Money Actually Goes
Labor dominates. Salaries for teachers, administrators, counselors, and support staff are the single largest line item, governed by contracts with unions including the United Federation of Teachers and the Council of School Supervisors and Administrators. Fringe benefits for that workforce, including healthcare premiums and pension contributions to the Teachers’ Retirement System, add billions more. Personnel-related costs consume the vast majority of available dollars before a single textbook is purchased.
Special education commands another large share, both inside and outside general classroom settings. District 75 serves students with the most complex disabilities across specialized schools and programs and functions essentially as a district within a district. On top of that, the city pays hundreds of millions of dollars each year on Carter cases, named after the Supreme Court decision in Florence County School District Four v. Carter. When the DOE fails to provide a student with an appropriate public placement, parents can place the child in a private school and seek tuition reimbursement through legal proceedings, and those costs have been climbing for years.6Office of the New York City Comptroller. Letter Report on the Controls Over Payments for Carter Cases by the New York City Department of Educations Bureau of Non-Public Schools Payables
Pupil transportation runs thousands of bus routes across the boroughs every day and is another large fixed cost. The city also makes mandatory per-pupil payments to charter schools based on their enrollment, at rates set by state law that the DOE has no discretion to lower. Between labor, special education, transportation, and charter payments, the share of the budget genuinely available for new programs or discretionary investment is far thinner than the $44.6 billion headline suggests.
The Class Size Mandate Reshaping the Budget
The biggest new pressure on the operating budget is the state class size reduction law, enacted as Chapter 556 of the Laws of 2022. The law requires the DOE to meet annual benchmarks toward citywide class size caps by the end of the 2027–2028 school year. Compliance means hiring more teachers, finding or building classroom space, and in some cases restructuring how schools use the space they already have.
The fiscal response has been contested. The city’s FY2026 executive budget included $122 million to hire roughly 1,000 educators, down sharply from the $543 million in the preliminary budget that would have funded about 6,000 new hires. At the same time, the city added $1.5 billion in capital funding for the School Construction Authority to address the physical space side of compliance. The gap between those two figures reflects an expectation that the state legislature will relax the near-term targets, possibly lowering the benchmark for the upcoming school year from 80 percent of classrooms in compliance to 70 percent.
Enforcement is where the law has teeth. If the DOE misses its annual benchmarks, the State Education Department can order a corrective action plan that must be signed off by both the teachers’ union and the administrators’ union, then certified by the NYC Comptroller to confirm that sufficient funding has been allocated. If the city still fails to comply, the state can withhold all or part of Foundation Aid, which would be devastating to the operating budget.
Capital Budget
Capital spending sits outside the $44.6 billion operating budget but shapes it over time. The School Construction Authority’s five-year capital plan for fiscal years 2025 through 2029 totals $20.5 billion, a $1.5 billion increase over the version adopted in July 2024.7New York City Council. Report on the Proposed Fiscal 2025-2029 Capital Plan and the Fiscal 2026 Preliminary Capital Commitment Plan
The plan splits roughly into capacity programs and capital investment. Capacity programs, which cover building new schools, reducing class sizes through physical expansion, and removing aging temporary classroom trailers, account for about $7 billion, with new construction alone budgeted at $6.1 billion. Capital investment covers upgrades to existing buildings, including boiler replacements, electrical work, accessibility improvements, and roof repairs, at approximately $7.5 billion.7New York City Council. Report on the Proposed Fiscal 2025-2029 Capital Plan and the Fiscal 2026 Preliminary Capital Commitment Plan New buildings eventually require staffing, and deferred maintenance eventually becomes an emergency expense, so capital decisions quietly drive future operating costs.
When the Budget Gets Decided
The budget follows a calendar set by the New York City Charter and runs for months before the July 1 start of each fiscal year.8New York City Council. The Budget Process Each January the mayor releases the Preliminary Budget, the first look at proposed spending and the first signal of where cuts or investments are likely. The City Council then holds hearings where DOE officials testify and advocacy groups and community education councils weigh in through the spring.
In April the mayor releases the Executive Budget, an updated proposal that incorporates Council feedback, revised revenue projections, and the results of state aid negotiations in Albany. Final negotiations between the mayor and the Council close in late June, and the adopted budget must be in place before July 1 so funds can flow at the start of the new fiscal year. The window between January and the June handshake is when public pressure can actually move numbers. Once the budget is adopted, allocations are largely locked for the year.