Note — This entry was written on March 21, 2013.
New York’s Tax Cap: Economic Efficiency or Educational Idiocy?
Governor Andrew Cuomo took his oath of office on January 1, 2011. The temperature gauge in Albany bottomed out at 28º Fahrenheit on that day. For school districts throughout the state, it has become increasing more frigid ever since. Through a series of maneuvers including the implementation of the Property Tax Cap, Governor Cuomo is steadily driving down the quality of education in the state in the name of fiscal responsibility.
As a teacher, I can already see the results taking shape within my own district. Over the course of the last few years, we have lost dozens of teachers due to cuts – cuts that have been made necessary, in large part, by the Tax Cap and the impact it has had on the process of putting together a budget that is likely to gain voter approval. My district, Alden Central Schools, is not unlike other districts throughout the state in that it is doing whatever it can to stay afloat, both financially and programmatically. It has managed to stay afloat, but it certainly is no longer providing the same quality of education that it was able to provide just a few years ago.
When facing a budget gap, districts have few options available to them to rectify the situation. In simplified terms, they can increase revenue by raising school taxes or decrease expenditures by cutting jobs and programs. They can try to alleviate the extreme nature of either of those moves by dipping into the district’s fund balance, but once that balance is depleted, the district is, for all intents and purposes, finished. That’s it. Those are the major choices. It used to be that the combination of state aid and property taxes provided the necessary funds to maintain the quality of the educational system. That is no longer the case. State aid has been stagnant, basically frozen at the same levels since 2008. Now with the implementation of the Tax Cap, that source of funding has been crippled as well. That leaves only painful options.
Dr. Lynn Fusco, Alden’s Superintendent of Schools, has voiced concern over the long-term sustainability of the system as it stands. “You get to a point where either you’re going to be programmatically, educationally insolvent, or you’re going to have no money.” Many districts have been using their financial reserves, the aforementioned fund balances, to minimize their proposed property tax increases and limit cuts to programs and staff. Alden has been doing so as well, but what happens when the fund balance is gone, when there is no money left? Dr. Fusco added, “Can a school district go bankrupt? That’s the question that’s been asked for probably the past three years, and now they’re starting to investigate. Well what happens? How does that work? Can a public agency go bankrupt? In the past you couldn’t because you would just levy the taxes that are necessary to maintain the school district. Now you can’t do it because you have a cap.”
Let’s take a look at Governor Cuomo’s Tax Cap. On the surface, it appears to limit the increase in property taxes to 2% over the previous year. It isn’t nearly that simple, but it seems to me that the governor would like people to think about it in just that simplistic of a manner. According to Governor Cuomo’s website, the Tax Cap is described as follows:
1. The Tax Cap applies to all school districts and local governments (i.e. counties, towns, villages and special districts) and is set at the rate of inflation or 2 percent, whichever is less.
2. To preserve local control, the plan empowers residents to go over the cap with a 60 percent majority vote for school districts and 60 percent of the local governing body for local governments when they believe it is in the best interest of the community.
3. Only limited exceptions are allowed for the cap, including one-time needs for large legal settlements or limited pension growth.
4. To encourage cost savings, local governments are rewarded for consolidation of services. (governor.ny.gov)
The segment of the description that seems to permeate the public airwaves is the first point mentioned—that the cap is 2% or the rate of inflation, whichever is less. This is totally misleading the public. There are numerous exemptions that can be factored into a district’s tax cap for a given year. According to Paul Hutschenreuter, the President of Alden’s Board of Education, the tax increase for the 2013-14 school year could be as high as approximately 4.6% without violating the Tax Cap and without needing a 60% supermajority to pass. How is this possible? That number is more than double what the governor would have you believe is the highest tax increase available to districts without triggering the controversial 60% supermajority clause. It’s possible because there are numerous circumstances that can be legally factored into the Tax Cap figure. These include the following possibilities:
A growth factor reflecting the “quantity change” in taxable property values in the base year. This factor is based on actual physical changes to taxable property such as new construction of homes, stores and offices and not mere changes in the assessed value of existing, unchanged taxable properties. These taxes can be added to the allowable (capped) levy in the first year after the value of the change is reflected on the local tax roll.
Tort settlements or awards whose costs exceed 5 percent of the tax levy in the base year. A tort is a type of lawsuit seeking
damages for personal injuries caused by negligence. Tort settlements exceeding 5 percent of a jurisdiction’s tax levy are rare.
Capital costs (including debt service) for school districts, which cannot borrow money for capital purposes without voter approval.
Pension contribution increases that exceed two percentage points of covered payroll.
A carryover of up to 1.5 percent of unused tax levy growth to the following year. For example, if a city raises taxes by 2 percent in a year when its cap is 3 percent, 1 percent can be added to the subsequent year’s levy cap. (empirecenter.org)
My belief is that if our district, or any district for that matter, put forth a budget for a public vote that includes a tax increase of more than 2% but less than the actual maximum tax increase allowed by the law, it would lead to voter confusion and resentment toward the school district. For example, Alden could potentially ask for the 4.6% increase mentioned earlier. That figure would not trigger the 60% supermajority clause. Voters would be likely to suspect the district was somehow trying to pull a fast one or “playing politics.” A proposed budget of this sort would almost certainly be defeated under the current circumstances. Voters have been bombarded with misleading information from Governor Cuomo implying that their taxes would be spared an increase surpassing the mythical 2% figure.
Another problem with the Tax Cap legislation is the notion of the 60% supermajority that is now needed to pass a budget that exceeds the calculated tax cap levy. How is this constitutional? It boils down to some votes carrying more weight than others, completely contradicting the concept of one person, one vote.
The combination of the Tax Cap and reduced effective levels of state aid are forcing districts to lower the quality of education that they provide to students. While it’s true that education is a multibillion dollar industry, it is also true that it is an industry unlike any other. Our product is of the human variety; we are molding minds. School districts cannot raise revenue by traditional methods of business, so the cuts to programs and staffs continue. We have already started damaging our products—our students—through the elimination of quality teachers who have seen their careers pulled out from under them. We have seen students with fewer choices in the amount and quality of available electives. We have seen students packed into larger and larger classes where the amount of attention from their teachers is inevitably reduced. Extracurricular activities have been whittled down or chopped completely, leaving students deprived of the well-rounded educational experience that they deserve.
Education should serve as a springboard to the future successes of our students, not as a cliff that they just want to jump off of as soon as they get the chance. It was 28º Fahrenheit in Albany the day that Governor Cuomo took office. He subsequently moved into his mansion while the students of New York have been left out in the cold.