Increasing pension costs that are squeezing school budgets this year have a flip side: School districts will have an easier time raising more money through taxes without exceeding a state-imposed cap.
A report by the Empire Center for New York State Policy released Tuesday found that the average school district tax limit – once touted as a 2 percent cap – has increased this year to 4.6 percent because of a jump in teacher pension contributions.
In Erie and Niagara counties, a dozen districts will be able to seek tax levy increases of 5 percent or more without needing a supermajority of voters to approve the budget, according to an analysis by the conservative fiscal watchdog organization.
E.J. McMahon, Empire Center senior fellow, contends that a pension exclusion that was slipped into the tax cap calculation shortly before it was approved has undermined its effectiveness. Poor districts in the state, he found, are able to raise the tax levy even more than their wealthier counterparts this year because of the way the tax cap is calculated.
“The pension provision – added at the insistence of Assembly Speaker Sheldon Silver – diminishes the protection the law was supposed to provide for some of the state’s poorest taxpayers,” McMahon wrote after analyzing school district data provided to the State Comptroller’s Office.
State law that took effect last year places a limit on the amount of money school districts can raise through taxes and requires districts to seek approval from 60 percent of voters if they want to exceed that cap. Although the base cap included in the law is 2 percent, it is calculated individually for each school district and allows items such as pension rate increases and new construction costs to be excluded.
This year, because school districts have been hit with a particularly large contribution rate increase for the state Teachers Retirement System, the allowable tax levy increase in many districts has gone up. Across the state, according to the Empire Center, school districts will be able to seek an average of 4.6 percent without a supermajority compared with an average of 3 percent last year.
“The solace for taxpayers is this is unusual and won’t happen in most years,” McMahon said.
That doesn’t mean every district will seek to max out the tax cap. The Lancaster Central School District, for example, could seek a 5.99 percent increase in the amount raised by taxes next year. Instead, it will ask voters to approve a 3.96 percent increase in the tax levy when residents vote on the school budget later this month.
Other districts are proposing budgets that would raise almost exactly the amount of taxes the state limit allows. In Niagara Wheatfield, where voters rejected a proposal last year that exceeded the tax levy limit, district leaders have crafted a proposed $62 million budget that would increase the amount raised by taxes by 5.91 percent – just within the district’s limit.
School Board members in Niagara Wheatfield debated cuts to kindergarten or other popular programs before settling on a district budget that trimmed teachers and made other cuts to stay within the tax levy limit.
David Albert, of the New York School Boards Association, contends districts need the pension exclusion to help make up for the jump in pension costs next year.
In some local districts, that contribution rate increase – which is paid as a percentage of teacher salaries – will mean millions more in pension expenses next year.
“We think it’s critical that the exemption be there in the tax cap,” Albert said. “Were it not for the exemption, schools would be making even more severe cuts in programs and services than they already are.”