Written collaboratively by Deborah Cunningham and Kimberly Shannon
The Bureau of Labor Statistics reported on November 17 that the Consumer Price Index (CPI) increased 0.2 percent in October. Based on the first ten months of the year, inflation was running on par with last year at a 0.02 percent increase. 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.)
As NYSASBO has mentioned before, this poses a serious problem for districts in that costs will be increasing despite the low inflation, but districts will not be able to increase their tax levy for the 2016-17 school year one dollar if they stay within the tax cap.
Two other factors make this low tax cap particularly concerning: First, the Division of Budget predicts that inflation will rise by two percent next year, but tax cap growth is determined by looking at inflation in the prior year. In other words, while inflation is rising, districts will be budgeting within a tax cap that assumes no inflation.
Second, the CPI measure used is based on household costs for all urban consumers, whereas school districts costs are based on a different set of expenses, heavily influenced by the cost of paying teacher salaries. That means that the tax cap is based on a measure that might not accurately reflect school districts’ economic conditions.
The New York State School Boards Association released this week the results of a survey showing that 40 percent of school board members intend to seek an override of the tax cap next year. This tax cap issue has board members and administrators in a tough spot, particularly as a tax cap override could mean that taxpayers would lose out on a new STAR tax credit that was established in 2015.
I’ve spoken to a number of people who hadn’t heard about this tax credit, so I did some research that I’d like to share. According to Tax Law 606, the amount of the credit varies by year and ranges from $185 to a percent of the STAR tax savings for taxpayers at various income levels. Most importantly, the tax credit wouldn’t be allowed if the district adopts a budget in excess of the tax levy limit. Similar requirements are in place for the fiscally dependent city school districts (Rochester, Buffalo, Yonkers, and Syracuse).
I encourage education stakeholders to be wary about this tax credit issue, as it does pose a bit of a gamble. It seems that if your district does get an override, you can increase your tax levy but your taxpayers can’t get the new tax credit. If you don’t get an override, you can’t increase your tax levy but your taxpayers would still be eligible for the tax credit.
It’s also important that we continue advocating for a solution to this low tax cap. The Education Conference Board and the Regents are both requesting funds to offset the losses incurred by this low cap, and NYSASBO supports this request. Our schools need adequate, predictable funding that provides opportunities for all children to receive a meaningful education. More than ever, our state needs an educated workforce that contributes to a strong economy in an uncertain world.