June 25, 2011 

LEGISLATURE PASSES TAX CAP, NYSSBA PRIORITY BILLS

Following years of debate, the state legislature has passed a cap on the local property tax levy.  School districts wishing to spend an amount that generates a levy increase above the cap will be required to secure a passage rate of 60% of those voting.  They will also be required to use specific ballot language that makes clear that the district would be exceeding the cap.  Districts where local budget votes fail twice would only be authorized to spend the same amount as the previous year, irrespective of increases in health care, contractual expenses or student enrollment.  There are several exemptions from the cap calculation, including certain pension cost increases, capital expenditures, court judgments and tax certiorari payments.  NYSSBA successfully opposed this effort for several years as an intrusion on the authority of local school boards, as well as local voters.  When imposition of the cap became inevitable, NYSSBA advocated mandate relief that would help districts live within the new fiscal constraints.

The calculation of the tax levy cap using current figures, is as follows:

• 2% or the rate of inflation, whichever is less.  For the current year, this generates a 1.6% increase (the current rate of inflation) in the levy.
• Pension cost increases above 2% of payroll dictates 1.3% that can be added to the levy beyond the inflationary increase of 1.6%. The result is a total allowable 2.9% increase in the levy above the prior year.
• An additional amount is allowable for growth of the district’s tax base.  This figure is between 1% and 2%, depending on the region of the state.  As such, the allowable levy increase (without requiring an override vote of 60% of those voting) is between 3.9 and 4.9% for next year.  Subsequent years will vary, depending on changes to pension costs and local growth rates.
• If a local district budget is under the cap, the difference between the requested amount and the cap amount can be carried over to the next year.
• Beyond this base figure, court judgments and tax certiorari cases that create at least a 5% increase in expenses and any costs of capital projects approved by voters can be added dollar for dollar into the levy without triggering the need for an override vote.
• Each school district will be required to submit their proposed budget to the state comptroller, education commissioner and the tax commissioner by March 1^st of each year.  This obviously begs the question of how we will know the levy amount when the state doesn’t authorize an amount of state aid until at least April 1^st.  The effect of this requirement is that school districts will be forced to rely on the Executive Budget proposal, giving even more leverage in the state budget process to the governor.
• There is no five year expiration date for the cap.  It will last as long as rent control in New York City is in place, or until repealed by the legislature.

STATE TAKES FIRST STEPS TOWARD MANDATE RELIEF

Student Transportation:  This NYSSBA priority position was included in the legislature’s mandate relief legislation.  It allows school districts to end the practice of providing a seat for every potential student bus rider in the district and instead base bus routes on patterns of actual ridership.  NYSSBA had previously obtained a determination by the education commissioner that this was an allowable practice, but the legislation leaves no doubt.  The resulting savings should be significant for districts, as the new route planning can be done with sophisticated computer programs that have buses spending less time in operation.  This allows districts to employ fewer drivers and replace buses less frequently; let alone the savings resulting from burning less diesel fuel.  Just as importantly, the measure allows districts to jointly plan and share the cost of transporting non public and special education students. 

Cooperative Purchasing:  New York State is one of only two states that does not allow school districts to do their purchasing through national buying cooperative programs or to “piggyback” their contracts onto already existing contracts from other states, school districts and localities.  Other states utilizing this practice have saved hundreds of millions of dollars.  Use of national purchasing cooperatives and piggybacking allows districts a much broader array of products and services at a discounted cost to taxpayers.  This authority is a longstanding NYSSBA priority.  The new law makes a timid attempt to bring our state into the electronic age by allowing districts to piggyback onto federal contracts for computer hardware, software and professional services, county works projects and federal defense supply contracts.  The fact that they continue to prevent the use of national cooperatives is an attempt to protect the archaic OGS state contract.  School districts may forego competitive bidding when they use the state contract.  However, the state contract frequently omits needed items, provides inadequate selections, offers few savings and the process is slow.  As a result, school costs will continue to be needlessly high and taxpayers will foot the bill.

Pension Borrowing:  NYSSBA has long advocated for school districts to have the authority to create pension reserve funds for their teaching staff.  This would allow districts to smooth out sharp increases in pension costs from year to year without jeopardizing educational programs.  The legislature has now authorized districts to borrow to pay up to 125% of pension increases incurred during the next three years.  For districts in dire financial circumstances, this would be a helpful fiscal tool.  However, districts should be extremely cautious, as the bonds that may be issued for this purpose are not tax exempt and come at a high interest rate, leaving districts to pay close to double the actual pension costs up to 15 years after incurring them.  Rather than adjust employee salaries and benefits to an affordable level, districts may be pressured by unions to borrow to pay pensions so that current funds can be used to pay higher salary levels.

Mandate Relief Council:  The law establishes a joint legislative and executive council to hear petitions from local governments and school districts for relief from specific mandates by providing an alternative method of compliance or for permanent relief from “costly or burdensome mandates”.  The council would also review and refer unfunded mandates to the legislature and to executive agencies for modifications or repeal.  This joint council is based on NYSSBA’s Playbook legislation on special education, where a similar council would be empowered to review all mandates beyond those imposed by the federal government.

Energy Purchasing:  The new law also authorizes the Office of General Services (OGS) to provide centralized electricity purchases for schools.

Local Cooperative Services:  Local municipalities (school districts are municipalities) may share services, materials and equipment.

Shared Superintendents:  Up to three school districts with enrollment under 1,000 may share a superintendent.

Pre-K Census:  Districts need only determine the Pre-K census every two years, rather than every year.

Deputy Claims Auditor and Claims Sampling:  Districts are authorized to appoint a deputy claims auditor to cover times when the claims auditor is unable to fulfill their function.  Districts with more than 10,000 students may audit claims using sampling methodologies, rather than audit every claim.

NYSSBA ANALYSIS

Following months of calls for transparency and reform in Albany, the end of the 2011 legislative session was awash in secrecy and back room deals.  The result was imposition of the long anticipated property tax cap and a greater recognition of the need for mandate relief for school districts.  The legislature clearly allowed newly elected Governor Andrew Cuomo to dictate a process marred for years by utter dysfunction, resulting in a much more focused agenda.  On behalf of school districts, NYSSBA was able to use the heightened awareness of the need for fiscal restraint to urge adoption of several sorely needed mandate relief items.  Each of these items was introduced and debated in the legislative conferences.  Several of the items (listed above) were passed by the legislature and they will prove very useful to districts, but there is no question that in the end, state leaders were once again hesitant to address the large, uncontrollable costs that will prove most burdensome to schools and costly to taxpayers. 

Next year, the loss of federal education jobs funds, depletion of reserve funds, decreased state aid provided this year and the new restriction on local revenue will undoubtedly prove challenging to districts.  Legislators have claimed that their motivation for supporting the tax cap was to force consideration of the truly onerous and needless district costs; Triborough, 3020-a, the pension system, health insurance costs and special education mandates.  Next year’s school district fiscal circumstances, combined with an election year, may well force the issue once and for all. 

Earlier in the session, the state budget included the longtime NYSSBA priority of two year funding for school aid.  The change affords districts the ability of predicting next year’s aid at an increase of $800 million.  This amount is enough to cover the loss of federal jobs funding and the traditional reimbursable expenses of BOCES, Transportation, Special Ed and Building Aids.  If that is in fact the case (using the tax cap calculation provided above) most districts should once again find themselves in challenging, but not horrific fiscal circumstances.  The average district tax levy increase should fall within the range of what has been asked of local voters for the past several years.  Of course, all of that will change if the legislature reneges on its state funding pledge.  More importantly, the governor and legislature will need to address the dramatic discrepancy in the impact of the tax cap on school districts.  Low wealth and small rural districts will be unable to raise sufficient revenue to provide a sound, basic education.  High performing districts that rely most heavily on local revenue will find it hard to maintain existing and expected programs and services under the cap.  NYSSBA will need to continue to drive the need for reform of the funding formula, as well as the need for true cost containment home to state leaders.  You will need to provide them with the local information and impact needed to make it relevant to their own interest.

In addition to providing both predictability and funding constraints, the 2011 legislative session was notable for its own restraint in imposing new unfunded mandates.  Perhaps lawmakers were simply focused on the mandated tax cap, but their sensitivity to having provided decreased aid allowed NYSSBA to successfully discourage efforts to pass new unfunded mandates on our school districts.  Changes that were made, such as guidance on addressing head injuries in student athletic competitions, were undertaken with care to avoid significant new costs and preserve local authority.  Direct attacks on school governance, such as mayoral control in Rochester and the State Education Department effort to oust school boards and take over low performing schools were turned back as well.  The end product of this “changed Albany” has so far been both a focus on reigning in state costs and a start on allowing school districts to do the same.  The visibility and influence of NYSSBA and its members has never been greater than it has been this year.  You and your association provided legislators with vital information on policies and their impact on our schools.  You were represented in legislative offices every day.  With you and for you, NYSSBA made a difference.  As the final and official status of all legislation affecting school districts is tallied, NYSSBA will promptly provide you with the most up to date information.

The 2011 Legislative Session will be notable for having recalibrated educational revenue.  With your continued involvement, the 2012 Legislative Session will be about recalibrating actual educational costs.   

CONGRESS:  NO NEW SCHOOL NUTRITION COST INCREASES!

While the state legislature was completing deliberations, Congress was making an important change to the new federal school nutrition requirements.  From its inception, NYSSBA lobbied extensively on this legislation and while passage of the law created significant new challenges for school districts, the most recent Congressional action eases the burden considerably.  The following direction will guide federal agencies as schools implement the new requirements.  Congress “urges restraint and practical timelines for implementing new national nutrition standards in the school breakfast and lunch programs. As many of the representatives in states and local school districts have cautioned, an overly aggressive implementation schedule and unrealistic demands on changes in nutrient content can lead to burdensome costs, estimated to be about $7 billion over 5 years. Therefore, the Committee directs FNS (Food Nutrition Services) to issue a new proposed rule that would not require an increase in the cost of providing school meals."