The state failed to meet this deadline, however, and the court appointed three referees who were given until November 30, 2004 to submit a compliance plan to Justice Leland DeGrasse of the State Supreme Court. Justice DeGrasse agreed with the referees' recommendations and in 2005 ruled that New York City schools needed an additional $5.6 billion in annual operating aid and an additional $9.2 billion over five years for building, renovating, and leasing facilities in order to provide students with their constitutional right to the opportunity to receive a sound basic education.
Governor Pataki appealed again to the Appellate Division. In March 2006 the Appellate Division upheld most of the Supreme Court's ruling, ordering the state to provide between $4.7 billion and $5.63 billion in annual operating aid and $9.2 billion in capital funds. On April 1, the legislature enacted capital funding that met the court's requirement, but it did not comply with the operational funding order.
In November 2006, the Court of Appeals reaffirmed its 2003 decision, but citing the limited authority of the courts to direct the manner in which state money is spent, merely ordered the state to consider providing at least $2 billion more in annual operating aid to New York City's public schools.
In January 2007, Governor Eliot Spitzer proposed education finance and accountability reforms that included statewide increases of $7 billion in annual state education aid, including $5.4 billion for New York City, phased in over four years. The legislature passed Governor Spitzer's recommendations in April 2007 (State Education Budget and Reform Act of 2007-08).
CFE now works to secure full funding and implementation of the massive school finance and accountability reforms, to ensure transparency and adequate information to measure academic progress, and secure meaningful public participation in the development of education programs and policies. The watchdog organization has been instrumental in developing and implementing the "Contract for Excellence", as well as other initiatives seeking to bring new funds and resources to the highest-needs students in the lowest-performing schools across New York State.