District News
What a tax cap may mean to area schools
June, 2011
New York’s Tax Cap Proposal: It’s really a zero percent cap for schools
Press release from HFM BOCES
New York Governor Andrew Cuomo has said that the
current bill to cap local property taxes would “change the
trajectory of the state for good.” Recent agreements among
legislative leaders on an outline for a two percent tax cap seems to
indicate that the game is about to change. However, will things be
better or worse for New York schools and property taxpayers?
The proposed tax levy cap does not cap school district or
municipality spending, but limits the year-to-year increase in the
amount of money that these entities can be collected in property
taxes.
Under the current legislation, if voters do not approve the tax levy
increase proposed by a district, the district would be required to
adopt a contingency budget that “requires a tax levy no greater than
that for the prior school year.” Simply stated, that means no
change, zero percent increase.
New York’s Assembly defines a tax levy cap as limiting the tax
increase to two percent or a figure tied to change in the national
Consumer Price Index, whichever is less. New York State Council of
School Superintendents’ Robert Lowry says the “so-called two percent
or inflation figure would be used as a trigger for determining what
vote would be required to approve a school tax levy increase.”
Lowry calculates the “trigger” for 2011-12, if a tax cap were
already in place, at 1.64 percent. If the district proposed an
increase below the trigger, more than 50 percent of voters would be
required to approve. If the proposed increase were above the
trigger, 60 percent or more would be required to approve.
“It is crucial to recognize that, with a tax cap, the question
voters are asked to consider would change,” Lowry said. “Instead of
voting on whether to approve a spending level, voters would be asked
to approve an increase in their tax levy, with the ballot noting if
the proposal exceeds the tax levy limit for the year.”
HFM BOCES districts face steep cuts in programs and staff
HFM BOCES component school districts would feel keenly the effects
of a tax levy cap.
Among the 16 component districts analyzing 2011-12 budgets in light
of a hypothetical two percent cap, Mayfield schools would face a gap
of $1,955,781; Broadalbin-Perth a deficit of $1.8 million; even tiny
Edinburg Common School District would confront an $116,000
shortfall. Every district would contend with the challenge of making
steep cuts to get their spending plans under the cap.
“Amsterdam would see a $3.8 million shortfall with a two percent tax
cap and flat state aid. This does not include the use of any fund
balance,” Amsterdam Superintendent Thomas Perillo said.
The Legislature passed, for the first time, a two-year education aid
formula that projects a four percent increase for 2012-13. However,
HFM BOCES District Superintendent Dr. Patrick Michel cautions that
the increase covers all categories of state education aid—building
aid, transportation aid, etc.— and points out that the governor’s
Gap Elimination Adjustment (GEA) is now a permanent part of the aid
calculation.
“We need to consider that most of that aid increase will be gone
after the aid formulas run, and the GEA will then take its
additional cut,” Dr. Michel said. “A flat or reduced aid scenario
for most schools is a real possibility.”
Gloversville Superintendent Robert DeLilli, whose district would
face a $2 million shortage, said the district’s choices “would be to
literally deplete reserves or cut deep into programs such as
athletics and extra curricular activities, all elementary art and
music, and reduction of kindergarten to half a day.”
Exemptions, but do they help?
The Assembly’s tax cap proposal does include some limited exemptions
for capital expenditures, large legal expenses, growth in property
values and increases in a district’s contribution to employee
pension plans. However, the proposed bill does not clarify whether a
district would be able to levy taxes to fund these “exempt” costs.
According to Lowry, the bills can be interpreted to exempt the costs
only for determining whether a proposed tax levy increase exceeds
the threshold requiring a 60 percent vote for approval.
The burden on school districts to reach a 60 percent voter approval
for their budgets would allow a minority of voters to control school
funding decisions.
Local governments would be treated more favorably under the proposed
legislation. They would not be required to seek voter approval for
any tax levy increase. To approve a tax levy increase greater than 2
percent or inflation (whichever is less), they would require
approval by 60 percent of their governing body (e.g., town board or
city council). If unable to gain that percentage, they would still
be permitted to raise their tax levy by up to the lesser of 2
percent or the inflation figure – they would not face the zero
percent cap proposed for schools.
While schools confront the specter of a tax levy cap and grapple
with rising costs and devastating state aid reductions, fair and
equitable distribution of state aid and mandate relief remain the
best hope for preserving school programs aside from a complete
redesign of New York’s educational system.
Enabling regional collective bargaining; creating regional health
insurance pools; providing pension reform; streamlining the state’s
special education requirements and reporting mandates; and reforming
the Triborough Amendment, which keeps all aspects of expired union
contracts in place—including scheduled pay increases— during
collective bargaining, would all help provide relief from the
effects of a tax levy cap.