1. (1) As used in paragraph (u) of subdivision 1 of section 3602 of the Education Law and in this section, instructional expense shall mean the sum of all expenditures in the year prior to the base year directly related to the instructional program in grades prekindergarten through 12 of the school district, exclusive of tuition paid to another public school district or to an institution, other than tuition paid pursuant to a contract authorized by article 89 of the Education Law. Such sum shall include general fund, special aid fund, and risk retention fund expenses reported in the annual financial report of the district for the following purposes:

   1. (i) curriculum development and supervision;
   2. (ii) supervision - regular school;
   3. (iii) supervision - special schools;
   4. (iv) research, planning and evaluation;
   5. (v) inservice training - instruction;
   6. (vi) teaching - regular school;
   7. (vii) program for children with disabilities;
   8. (viii) occupational education;
   9. (ix) teaching - special schools;
   10. (x) prekindergarten program;
   11. (xi) school library and audiovisual;
   12. (xii) educational television;
   13. (xiii) computer assisted instruction;
   14. (xiv) attendance - regular school;
   15. (xv) guidance - regular school;
   16. (xvi) health services - regular school;
   17. (xvii) psychological services - regular school;
   18. (xviii) social work services - regular school;
   19. (xix) pupil personnel services - special schools;
   20. (xx) co-curricular activities - regular school;
   21. (xxi) interscholastic athletics - regular school;
   22. (xxii) employee benefits as determined pursuant to subdivision (b) of this section; and
   23. (xxiii) for any other purposes that shall be identified by the commissioner.

2. (2) Total adjusted expense shall mean the sum of:

   1. (i) total general fund expenditures and interfund transfers minus expenditures of tuition payable to other public school districts in New York State other than school districts enumerated in chapter 566 of the Laws of 1967 as amended, minus expenditures for debt service, minus expenditures for transportation services, and minus transfers to the capital, special aid, debt service and risk retention funds;
   2. (ii) total special aid fund expenditures and interfund transfers minus expenditures of tuition payable to other public school districts in New York State other than school districts enumerated in chapter 566 of the Laws of 1967 as amended, minus expenditures for transportation services and minus transfers to the general fund and risk retention fund;
   3. (iii) total debt service fund expenditures minus expenditures for debt service and minus interfund transfers; and
   4. (iv) total risk retention fund expenditures for purposes of employee benefit claims related to salaries paid from the general and special aid funds.
3. (3) The portion of expense devoted to instruction shall mean the ratio of instructional expense as defined in paragraph (1) of this subdivision to total adjusted expense as defined in paragraph (2) of this subdivision. Such ratio shall be expressed as a decimal carried to three decimal places without rounding.
4. (4) Estimated instructional expense for the base year shall mean the product of the portion of expense devoted to instruction in the year prior to the base year multiplied by the total adjusted expense for the base year computed from the estimated expenses reported pursuant to subdivision (c) of this section.
5. (5) Estimated instructional expense for the current year shall mean the product of the portion of expense devoted to instruction in the year prior to the base year multiplied by the total adjusted expense for the current year computed from the estimated expense reported pursuant to subdivision (c) of this section.
6. (b) The cost of employee benefits to be included in instructional expense shall be calculated by multiplying the ratio of total expenditures for employee benefits, including expenditures from the risk retention fund for purposes of employee benefit claims related to salaries paid from the general and special aid funds, to total expenditures for salaries, both as recorded in the general fund and special aid fund, by the total expenditures for salaries, as recorded in the general fund and special aid fund, for those purposes listed in paragraph (a)(1) of this section. Such ratio shall be expressed as a decimal carried to three decimal places without rounding, and such calculated cost of employee benefits shall be expressed as a whole number rounded up to the next whole dollar.
7. (c) Commencing with the 1995-96 school year, school districts shall annually report estimates of total general fund, debt service fund, special aid fund and risk retention fund expense for both the base year and the current year in a format prescribed by the commissioner on forms provided for that purpose. The commissioner shall use such estimates to calculate a current year and a base year total adjusted expense, as defined in paragraph (a)(2) of this section, for each school district.

(a) Definitions.