WITH RESPONSIBLE SPENDING PLAN IN PLACE, SCHOOL DISTRICT SHOULD HAVE APPLIED SAME WISDOM TO REVENUE SIDE OF BUDGET
Originally posted March 25, 2014; revised and re-posted May 6 -- The budget plan that the North Shore School Board adopted at its April 4 meeting is a responsible proposal that limits spending to less than a 2% increase over the current year. The mild rise relative to past years is largely a result of lower than expected increases in pension and health insurance costs, a conservative teacher's contract, some very wise administrative restructuring, and a small drop in enrollment that has allowed some trimming of staff (hopefully to retirements and not excessing) at the elementary level.
However, on May 20, residents will not be voting on the budget, but rather on a tax levy, that, based on the School Board's discussion at the March 20 and April 3 meetings, will be 87,883,212.72 - a 1.56% increase over the current year's and $319,548.66 below the levy limit imposed by Albany (1.898%).
On its face, this seems like a fiscally responsible decision - after all, residents will have a lower tax bill than what the state is actually allowing the district to collect. However, the reality is that reducing the levy by 33 basis points below the cap will only save the average household about $2.50 per month, while putting a $320,000 hole in the district's revenue every year for perpetuity. That is because under New York State law, each district's tax cap is based on the previous year's actual levy - not the previous year's levy limit. Thus next year's $320,000 lower tax levy will not only bring down the following year's limit, but, in turn, every subsequent year's - all for less than a dime a day in savings to taxpayers.
During the March 20th Board of Education meeting, essentially the same argument was made by the Superintendent, and by at least two trustees, as they spoke of the importance of resisting the temptation to apply large portions of the $2.5 million dollars received from Albany all at once to offset the potential tax shift from the decommissioning of the Glenwood Landing power plant, especially when, based on what county and state officials have said, there will only be a shift of 1% this year. They said doing so would artificially inflate the budget and deflate the tax levy, thereby reducing the following year's tax cap - putting the district in the situation of possibly having to exceed it with a super-majority just to maintain the same level of spending the following year. The same rationale should be applied to the district's other reserves.
Furthermore, to make up for the $320,000 shortfall in the levy, the district will have no other choice but to dip further into its reserves than it already would have if the levy were at the limit. Superintendents of the more fiscally secure districts on Long Island, like North Shore, have stated that they believe that their districts can meet the challenges of increasing costs within the constraints of the tax cap for four or five more years, before reaching that point where significant cuts to educational programs will have to be made. These districts, unlike those that have already reached that point, have been able to protect themselves for the time being by having in the past maintained relatively healthy reserve funds, from which they have gradually begun to withdraw in order to cover ordinary expenses. To do so unnecessarily, when funds can be raised through a tax levy that is within an already low cap, in order to "make a statement" that will go unnoticed by taxpayers who will have only gained an additional eight cents of pocket change each day, is hardly fiscally responsible - it accelerates the depletion of reserves to cover artificially deflated tax levies. It becomes a downward spiral.
This is exactly the trap into which some districts have fallen - and if they haven't already reached the point where they have had to attempt to break the tax cap or make massive cuts to programs they very soon will, as they will no longer have sufficient reserves to cover shortfalls in the tax levy and other sources of revenue.
Albany no doubt ought to consider reforming the tax cap law so as to remove the incentive for a school board, uncertain of what the future will bring, to push the levy to the limit even when that district may be in a position to further limit tax increases. This could easily be done by allowing districts to base their cap on the previous year's limit, rather than on the actual levy. But until that day comes, is it really "fiscally responsible" to put a $320,000 hole in every future budget, deplete reserves, and jeopardize long term fiscal health to bestow a token tax reduction of less than a dime per day for the average homeowner?
The School Board has wisely adopted a fiscally responsible spending plan that keeps costs in check, in part as a result of needed administrative restructuring. Unfortunately the district did not apply the same sort of wisdom to the revenue side of the budget when it chose to make a well-intentioned but politically expedient gesture that will save taxpayers about $2.50 per month, rather than putting before voters a tax levy that is not only within the legal limit of 1.898%, but that would also prolong the district's financial health and protect both educational programs and residents' property values. In the future, let's forego the symbolic gestures and spend the time and effort on making the case for both fiscal and educational responsibility.
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