EDITORIAL
FISCAL RESPONSIBILITYIt’s a pretty good bet that that as the North Shore School Board and Superintendent begin going through the first budget draft next week and during the subsequent months of budget discussions, the words "fiscally responsible" will be tossed around quite a bit. Unfortunately, these days that expression has too often become a misapplied synonym for “keeping taxes as low as possible.” As we go through the budget process, the community and its elected representatives should not conflate the two - especially in the era of the "2% tax cap," a misnamed New York State mandate that each year actually encourages fiscally responsible school districts to push the tax levy to the legal limit, when it might otherwise not be necessary or desirable to do so. That is because under New York State law, for school districts (but not municipalities) each year’s tax cap is based on the previous year's actual levy - not the previous year's levy limit. As a result, fiscally responsible school districts taking the long-term view, understand that by putting before voters a tax levy that is at the limit, rather than at a lower amount, they will be able to maximize their revenue in future years when the budget outlook is not as favorable as it is today.
As it is now, if a district decides on a levy that is, let's say $500,000 below the tax cap, it reduces each subsequent year's levy limit by that much, with each year’s allowable percentage increase in the levy limit compounding that amount for perpetuity (see chart to the right). This is precisely what the North Shore District did last year in the name of "fiscal responsibility" by deciding on a levy that was $310,000 lower than the tax levy limit. It seems like a big number, but in reality only saved the average taxpayer about $2.50 a month, while putting an ever growing hole in all future budgets. Additionally, the deliberate but unnecessary shortfall in tax revenue last year was made up for by withdrawing from reserves, thereby creating a situation which, with all other things being equal, requires a comparable depletion of reserves each year for perpetuity with that amount compounding as well. It becomes a downward spiral. While several school district leaders said last year that artificially deflating the levy was an “important symbolic gesture” and “the right message to send to the community,” the reality is that that decision will at some point come back to haunt us - probably not this year, but at a time when the financial climate is less favorable, causing cuts to meaningful programs or the letting go of three highly effective teachers – all for saving the average taxpayer less than a dime a day. If anyone at the dais this budget season or in future years says that the district must cut spending to stay under the tax levy limit, remember that $300,000 worth of those cuts will not be a result of any state imposed cap - but rather a cap that the school district imposed on itself during last year’s budget process. While some might argue that with a potential significant tax shift resulting from the demolition of the Glenwood Landing power plant on the horizon, reducing the tax levy by a few hundred thousand dollars below the limit is desirable and necessary, the hard truth is that the $2.50 a month savings that that would bestow upon the average taxpayer is not going to offer any protection at all. If one really wants to protect taxpayers from a hypothetical worst case scenario single year tax shift by reducing taxes, the district would have to go several million dollars below the levy limit to do so. And if that time ever arrives or the community would like to prepare for that possibility, then that discussion should be had – but the LIPA issue should never, as it was last year, be tied to meaningless nickel and dime gestures that will go unnoticed on tax bills and bank statements. Hopefully on Thursday, and over the next several budget meetings, district leaders will break from past practice and not just focus primarily on the spending side in its budget discussions, but also give the revenue side the attention it deserves. And, yes, of course, everyone wants low taxes - but let’s not equate a dime-a-day tax savings with fiscal responsibility. Additionally, districts across New York State ought to push Albany to reform its tax cap law so that a district's cap is based on its previous year's limit rather than on the actual levy, so as to remove the incentive for a school board, uncertain of what the future will bring, to push the levy to the limit even when that district may be in a position to further limit tax increases. But until that day comes, let's acknowledge that fiscal responsibility requires a long term perspective that does not sacrifice enduring fiscal health for pocket change. BACK TO HOME PAGE |
In the hypothetical situation shown in the chart above, the purple row shows the impact of a school district going below the tax levy limit in year 1 by $500,000 on that year's and two subsequent years' tax levy limits. The light blue row shows subsequent levies if the year 1 levy is at the limit. By year 3, the levy limit is $520,800 less than it would have been had the district "pushed the levy to the limit" in the first year. The tax saving in a district the size of North Shore would be small - in the above scenario, less than $4/month for the average taxpayer, while the impact on programs, staffing, or reserves would be significant over all years - not just in the first year.
Actual Tax Levy- The amount in taxes that a school district or municipality imposes on property owners collectively in a given year. Tax Levy Limit (aka - Tax Cap) - The maximum amount that New York State allows a school district or municipality to impose on property owners in a given year with approval by a simple majority of voters. Exceeding the limit requires approval by a 60% super-majority of voters. |