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School Business Matters: A Zero Increase Tax Cap?

By Deborah Cunningham posted 10-15-2015 16:04

  

CPI News:  With nine months of CPI data, inflation is flat, threatening the possibility of no growth in tax levy for 2016-17

The Bureau of Labor Statistics reported October 15, 2015 that on a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers fell 0.2  percent in September on a seasonally adjusted basis, the U.S. Bureau of  Labor Statistics reported today. Over the last 12 months, the all items index was essentially unchanged before seasonal adjustment.

For more information see:  http://www.bls.gov/news.release/cpi.nr0.htm. 

NYSASBO staff track CPI increases for their impact on the allowable growth factor for the Tax Cap and other business management matters.  Based on the first nine months of the year, inflation is running slightly on a par with last year (0.0 percent).  If the CPI remains low for the rest of 2015, the allowable levy growth allowed in the Tax Cap law will be less than one or even zero.  (The law does not allow the allowable levy growth factor to be less than zero.)   Examining CPI changes for the last three months of the year in recent years shows that inflation has not tended to spike at the end of the year but instead has remained flat or decreased slightly.

This poses a problem for school districts in that, despite low inflation, some costs increase, but they will not be able to increase their tax levy for the 2016-17 school year one dollar if they stay within the Tax Cap, which 97 percent of districts did for their 2015-16 budgets.  In addition Tax Cap growth is determined by looking at inflation in the prior year, but school districts must implement budgets in the coming year, for which the Governor’s Budget Division projects that inflation will rise by 2.3 percent.  With no growth in local revenues, an increase in State Aid will be critical for schools in 2016-17.

This situation of a Tax Cap with no increase also raises questions about contingent budgets.  If no growth is allowed for the Tax Cap, will large numbers of school districts seek overrides?  The consequence for a defeated budget is no increase in tax levy, which is the same as a formula that has no inflationary growth.  In this case, the tax levy allowed for a contingent budget would be the same as for a district that stayed within its allowable tax levy limit, so there really is nothing to lose by seeking a Tax Cap override. 

NYSASBO together with the Education Conference Board has written to the Board of Regents asking them to take into account this situation as they develop their state aid proposal to the Governor and Legislature for 2016-17.

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