Andrew Cuomo’s tax freeze surprise could be a game-changer for New York’s 700 school districts.

Since he took office, the Governor has tried to force school district merger and consolidation. His strategy — known in the corporate world as “starve the beast” — was simple: he would squeeze local budgets by a property tax cap and a reduction of state aid through the so-called“gap elimination adjustment” until the communities “cried uncle” and voted to merge. For a variety of reasons, that strategy has failed. Across the state, school district mergers are going down in defeat at the local polls.

The governor has now pivoted to a new strategy with a bigger hammer. (Well, let’s agree that depending upon how you look at it, I could have used “carrot” or “stick,” but clearly with this Governor “hammer” seems the appropriate metaphor.) According to his Briefing Book, the governor proposes to freeze property taxes for two years with two conditions:

• Year 1 (2014-15): “The State will provide tax rebates to homeowners with qualifying incomes of $500,000 or less who live in a jurisdiction that stays within the 2 percent property tax cap.”
• Year 2 (2015-16): Homeowners will get the tax credit if their jurisdiction stays within the property tax cap and develops “a plan for sharing or consolidating services and eliminating duplication and overlap.”

This is classic Andrew Cuomo, forcefully exerting a lever — in this case, the fear of tax payer outrage — to achieve a goal. Dig into the details of the proposal and you find additional levers that clearly intend to change the game, upset the status quo, maybe even break the paradigm. County school districts, anyone?

For independent school districts, [the plan] will be coordinated by the school district with the largest enrollment in the BOCES district. Each plan must achieve savings, in the aggregate, in an amount of at least one percent of participating entities’ levy in the year following the second year of the credit. This percentage increases to two percent and three percent in subsequent years. These savings must be applied to tax reduction. Failure to achieve planned savings could result in recapture of State aid to the local government or school district. (page 10)

There are two radical shifts in the Governor’s unprecedented approach:

• The shared services plan will be developed collaboratively by all school districts in the BOCES region.
• The plan must be coordinated by the largest school district within the BOCES and not by the BOCES itself.

From a problem solving perspective, this is an intriguing approach. By defining the challenge as a 1% reduction of the whole region’s pie rather than as a 1% reduction of each slice of the pie, the governor will change the conversation and provoke different, bigger and more innovative thinking. For example, instead of having a few, contiguous districts discuss sharing transportation services, the governor’s approach begs the question: Why not have every district in the BOCES share transportation services? Or food service? Or the business office? Or buildings and grounds? Or curriculum and instruction? Or special education services? Or the superintendency? Or …

You may think that I am reading too much into this language, that the governor’s hand is not so dramatically tipped in the Briefing Book‘s language. However, in a recent visit to Susan Arbetter’s Capitol Pressroom, Larry Schwartz, Secretary to the Governor, made this statement: “Why can’t one school system in a BOCES region do payroll? Why can’t one school system handle all IT services for all the school districts? Why does everyone have their own separate email system and their own separate IT system? Why can’t one school district provide legal services for all school districts in a BOCES? Why can’t one school district provide bus transportation? Why does everyone have to have their own separate contract? ”

And then he revealed the strategic pivot: “I’m not talking about consolidating school districts. We’re just talking about simple things like consolidating or sharing services to cut costs.”

While intriguing from a problem solving perspective, if enacted, the Governor’s proposal will

• Create a nightmare for the board of education and superintendent of the largest district in each BOCES region who will now own the regional shared services plan.
• Pit school communities against one another in terms of who wins and loses.
• Apparently cut a major stakeholder — the BOCES — out of the process.

Take a particularly challenging example and think of the complexities. Southern Westchester BOCES has dozens of school districts with a total 2013-14 tax levy of nearly $1.5 billion. The savings they must achieve in their year 1 shared services plan are more than $15 million. Estimated target savings over three years are more than $45 million. What’s that equivalent to? Assuming a full-time equivalent (FTE) cost of salary and benefis of $80,000, that’s about 600 FTEs over three years. How would you like to be the superintendent leading that effort affecting dozens of other school communities?

If approved, the governor’s proposal will present the state’s school districts with a complex and time consuming task. The burden will fall disproportionally on the largest school system within each BOCES. There will be painful trade-offs and likely more losers than winners. Agreeing to plans that hit the 1% annual regional savings hurdle will be extremely challenging, frought with all sorts of land mines and turf battles.

Achieving agreement for these regional shared services plans will test the most skillfully designed and executed collaborative decision process.