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Up and up and up: Schools struggle to contain taxes

Up and up and up: Schools struggle to contain taxes

Most school districts are holding the line on taxes in their proposed budgets as the state struggles

Most school districts are holding the line on taxes in their proposed budgets as the state struggles to recover from the recession.

Many districts are keeping tax increases under 3 percent, and some, including Schalmont and Schenectady, are planning no increases.

A survey by the New York State School Boards Association showed that 57 percent of districts in the state are planning to freeze their budgets at current levels or decrease them. Spokesman David Albert believes that the tax rate increase will be in the range of 3 percent to 4 percent.

“Districts understand that we’re still in a very fragile economy and people are still losing jobs or can’t find jobs,” he said. “I don’t think you’re going to find any kind of dramatic increases in most cases.”

The exception are districts in communities where cuts would be so damaging to educational programs that taxpayers have indicated a willingness to take a larger increase, Albert said.

The average school tax rate increase declined from the middle of the last decade as the state’s economy has worsened. The average increase in 2005 was 6.9 percent, compared with 1.9 percent with 2009, when districts were really starting to tighten their belts, according to the school boards association.

Last year, school districts were able to keep tax rate increases relatively low — at about 3.2 percent — because of the federal stimulus package, which helped supplant the state aid cuts.

Cut in state aid

This year, state aid to schools is being cut by $1.2 billion. Districts are using money from the $10 billion federal education jobs bill, dipping into their reserves and laying off employees to trim their budgets — and still have to submit budgets with tax hikes.

“It really speaks to the importance of state aid as a revenue source to school districts,” Albert said.

Shenendehowa Superintendent L. Oliver Robinson agrees that declining state aid is a major factor in tax increases in the past few years. In 2009, his district received $43 million in state aid. Even with the restoration of funds by the Legislature, it will get $36 million next year. At the same time, there has been a push to increase educational standards.

“It’s been a major challenge to try to do all those things and have a reasonable impact on the taxes while having a reduction in state aid,” he said.

Spending has gone up less than 1 percent a year, but the average tax increase has been about 31⁄2 percent to 4 percent a year.

In any district’s budget, personnel is the biggest expense, accounting for about 75 percent of school costs, according to Albert.

pay and benefits

Teacher compensation is the overwhelming factor driving up school costs, says E.J. McMahon, director of the Empire Center for New York State Policy, an Albany-based think tank.

“We have the best paid teachers in the country,” he said.

New York ranks second, with an average salary of $66,760, which places it just behind Alaska, according to www.teachersalaryinfo.com. By contrast, the national average is $49,720.

The starting salary for a teacher is $37,321, which is fifth behind Connecticut, Alaska, New Jersey and Illinois.

McMahon attributed the high salaries to strong unionization and a tendency for school districts to gravitate to their higher-paid neighbors in setting salaries.

With very few exceptions, enrollment is flat or shrinking in the state, but teachers have been added throughout the past decade, McMahon said. “We have relatively well-staffed schools,” he said.

In addition, many teachers receive generous health pensions and retirement packages and can retire in their late 50s.

This level of spending is unsustainable, McMahon said.

Albert said the teacher salary number is skewed because of high-cost areas such as New York City and its suburbs and Long Island, which drive up the average.

Michael Moran, spokesman for the Business Council of New York State, didn’t buy that.

“We wouldn’t be that far out of line if it was just an effect of New York City,” he said.

The state has the highest per-pupil cost — about $17,000 — which is about 50 percent to 60 percent more than the average. By comparison, Massachusetts, a state with a tax cap, spends about $13,500 and their students tend to do better on national tests like the SAT, according to Moran.

“They’ve proven you can do it spending less per pupil and getting better results,” he said. “I don’t think anyone would say Massachusetts is an anti-union or conservative.”

costly rules

New York, particularly upstate, has a shrinking manufacturing base and school enrollment, yet collective bargaining is driving up school costs, Moran said. The Triborough Amendment to the Taylor Law guarantees that salary and step increases continue even when a contract expires. This gives local boards of education no leverage in negotiations.

“You can have a school board that doesn’t reach a contract agreement but is still on the hook for millions of dollars in salary increases,” he said.

State law also prohibits school districts from changing health benefits for retired employees.

“You have to be able to control your costs. You can’t keep going up faster than any other state in the country,” Moran said.

The state school boards association also supports reforming Triborough Amendment, and Albert said that that could save school districts $93 million collectively.

The association and Business Council also believe the state should switch new teachers to a defined contribution plan such as a 401(k) plan, instead of a traditional pension plan, which guarantees a benefit amount.

Superintendents like Fonda-Fultonville’s James Hoffman said he would welcome changes to help control health insurance and retirement costs.

One idea Hoffman supports is to allow all school district employees to join the state health insurance pool. “The more employees you have in the system, the better rate you’re going to get from the insurance company,” he said.

Hoffman also favors increasing the required contributions to pension plans. He suggested perhaps implementing a system like New Jersey’s, where the percentage the employees have to pay into the system depends on when they were hired. The longer employees have until retirement, the less they would have to pay.

The New York State United Teachers union attributes the rise in school costs during the latter part of the decade to the settlement of a lawsuit brought by the Campaign for Fiscal Equity, which said the state was underfunding schools. To resolve the case, the state implemented a four-year plan to distribute an additional $1.8 billion in aid to schools.

School spending went up about 5.86 percent in 2006-07, 5.94 percent in 2007-08 and 5.3 percent in 2009 — the last year of the additional funding.

Then the state announced it would delay the phase-in of the plan because of the fiscal crisis, according to the teachers union. Since the crisis happened, school costs have been going up at a much smaller rate — 2.35 percent in 2009-2010 and 1.1 percent in 2010-11.

NYSUT input

School districts are already being fiscally responsible, without a tax cap, according to NYSUT President Richard Iannuzzi.

“For the last several years, school budgets have been passing with increases actually below the 2 percent mark that the governor has been talking about,” Iannuzzi said.

However, to implement a cap at the same time when the government is cutting aid and without allowing for any exemptions would be devastating to school districts, he said.

“How would it be structured so it didn’t have an inordinately negative impact on low-wealth districts, which history tells us it would?” he said. “Those are things that would have to be discussed and debated, and to do that in the context of significant reductions three years in a row in the state would hamper a school district’s ability to get the job done.”

Iannuzzi said teachers in New York are not overpaid but are actually paid less than their counterparts in other industries.

“It certainly would be unfair to single out teachers and compare them to other states and not compare all sorts of employees to similar work in other states,” he said.

Iannuzzi said administrative and management staffing has increased faster than teaching staff: “I’m not debating whether that’s a good thing or a bad thing.”

The union would be eager to explore creating larger health insurance pools, Iannuzzi said. Regarding the pension plan, Iannuzzi said New York is one of the most sound in the country and said a defined benefit plan is less expensive than a defined contribution plan, which would require the hiring of investment managers.

He pointed out that it is only in the past few years that school districts were hit with big contributions to pension plans. In the period before that, he said, the actual cost to school districts was less than what most employers have to contribute for the 401(k) plans.

Capital District Regional Planning Commission Executive Director Rocco Ferraro said school taxes have traditionally increased at a rate greater than inflation. School districts are restricted by state and federal mandates, existing contracts and the needs of children.

“It’s difficult to reduce the tax burden without some substantive changes in the ways we do business,” he said.

However, children’s education is important to people, Ferraro said. “When you cut those services, there’s an emotional reaction.”

Also, New York has made a conscious decision to invest in education. It has a lower student-teacher ratio than other states and goes beyond federal requirements in other areas.

School boards spokesman Albert said, “I don’t want to live in the state that spends the least on education.”

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