Report: School districts face $815M shortfall under tax cap

Report: School districts face $815M shortfall under tax cap

Cumulative gap would be $3.3B from 2010-11 to 2013-14, based on NYSSBA projections

School districts across New York face a potential shortfall of $815 million per year over the next four years just in meeting personnel costs under a property tax cap, according to a report issued today by the New York State School Boards Association.

The report, entitled Property Tax Cap: Pass or Fail for School Districts, illustrates how a tax cap of 2 percent or the rate of inflation – whichever is less – would limit property tax increases in school districts to an average of $229 million per year over the next four years.  At the same time, school districts could have a projected average annual increase of more than $1 billion in salaries, health insurance, and employee pension contributions.  That would leave school districts with an average shortfall of $815 million each year just in meeting these basic personnel costs.

“The long-term health of our state demands limitations on the growth of taxes and a sound educational system,” said NYSSBA Executive Director Timothy G. Kremer. “But a hard tax cap would clearly threaten the quality of public education by forcing drastic cuts in classroom teachers and academic programs.”

Over the next four years, school districts would be forced to cope with a $3.3 billion cumulative shortfall between property tax revenue and personnel expenses, assuming no layoffs or personnel changes.  In the 2010-11 school year, under a property tax cap school districts collectively would have been faced with an $894 million budget gap – the equivalent of 13,446 teaching and administrative positions, according to the report.

“While it is difficult to predict what specific measures 600-plus local school districts would take in response to a property tax cap, this analysis is meant to illustrate the cumulative, four-year impact of a tax cap on school district personnel costs,” said Kremer, who noted that personnel costs make up about 70 percent of a school district budget.

“The report shows the depth of cuts that would be needed in school districts under a tax cap.  Had a cap been in place this year, school districts would have faced an immediate need to eliminate nearly $900 million in expenses or find alternative revenue sources,” said Kremer.

NYSSBA’s report highlights seven cost-saving alternatives to a property tax cap that could generate an equivalent cost savings for taxpayers.  Those alternatives include establishing a mandatory minimum employee health insurance contribution, creating a defined contribution pension plan for school district employees, amending the Triborough Amendment of the Taylor Law, authorizing regional collective bargaining, and implementing a temporary freeze on public employee salaries.

 “The answer to holding down property taxes is for the state to grant school districts the ability to rein in costs as well as provide sufficient state aid,” Kremer said.

The report analyzed data from local districts, the New York State Teachers' Retirement System, the New York State and Local Retirement System, the state Division of the Budget, the New York State Office of the Comptroller, and the State Education Department.