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Jan 10, 2017 4:10 PMPublication: The Southampton Press

School Leaders Look To Change Future Of Tax Levy Cap

Remsenburg-Speonk Board of Education members support changing the state tax cap to 2 percent. BY ERIN MCKINLEY
Jan 10, 2017 4:52 PM

Suffolk County school officials are petitioning the state to take the guesswork out of annual budgeting by capping tax levy increases at a consistent 2 percent—irrespective of the Consumer Price Index.

Six years after it took effect in 2011, district officials are still trying to find the best ways to comply with the cap on the tax levy—which limits how much they can raise through property taxes each year by requiring supermajority voter approval to breach it—without losing essential programs and staff.

Currently, the amount a district can increase its tax levy is determined by the CPI—a calculated average of how much Americans pay for average home goods—or 2 percent, whichever is lower.

Many district officials say that when the cap was first implemented, they were led to believe that the annual increase would always be at or close to 2 percent. But the CPI has generally been much lower, and even approached zero last year, making the cap more like a freeze.

Due to the unpredictable nature of the CPI, and interest rates that have hit record lows, local school boards like Remsenburg-Speonk and others have been opting to send letters to Governor Andrew Cuomo’s office that the cap remain at a firm 2 percent every year so they can better plan for it.

“When they passed this tax cap law, everyone thought that it was at 2 percent, we know now that this year will be the fourth consecutive year it will be below 2 percent,” Dr. Ron Masera, superintendent of the Remsenburg-Speonk School District, said at last month’s Board of Education meeting. “What we are asking is to outline some of the problems with it and how something as simple as health care costs up our entire line in the budget. That is problematic in school districts, so we are asking the [State] Legislature to make 2 percent, 2 percent.”

Remsenburg-Speonk was one of the first districts to approve the letter in Suffolk County at its December 12 meeting. The letter, which is dated December 16 and signed by Dr. Masera, urges the State Legislature to remove the connection between the tax levy cap and the rate of inflation.

According to Dr. Masera, there was a lot of confusion surrounding the cap when it was first implemented, with few people realizing just how low the rate of inflation could drop. In 2010, the year before the cap was implemented, the CPI rate was 1.7 percent, a figure that jumped to 2.8 the year the cap was approved. In 2012, the first year the cap was implemented in the budget planning process, the cap and the CPI were both 2 percent.

Immediately after, however, the cap started dropping as inflation rates nationwide plummeted, falling to as low as 0.1 percent last year. For next year, state officials are projecting the tax cap will be remain low, hovering around 1 percent, a figure that will allow a small district like Remsenburg to only add roughly $117,892 to its current $13.2 million budget, a figure that will barely cover health insurance increases, officials said. If the cap was set at 2 percent, for comparison purposes, that figure would double to $235,785.46.

Dr. Allan Gerstenlauer, interim superintendent for the Tuckahoe Common School District, said he would love for the cap to be stabilized—though his single-school district has not yet sent a letter to Albany requesting as much. He said one of the issues with using the CPI is that districts are not using their money to buy common household goods, and the CPI has no impact on items like health insurance premiums and tuition rates.

“While it might make some sense to tie a tax cap to a rate of inflation, the CPI doesn’t really reflect the costs incurred by school districts,” Mr. Gerstenlauer said. “It’s a little bit of an unrealistic measure because we are not buying typical grocery list items that are on CPI—we are buying medical insurance in bulk. The 2-percent cap would be more logical not only for school districts, but for all municipalities.”

While his school board has not penned a letter to the state, he did note that the Suffolk County School Superintendents Association has been petitioning Albany on behalf of all school districts in the county.

According to Charles Russo, the president of the Suffolk County School Superintendents Association and superintendent of the East Moriches School District, there is a lot the state can do to ease the concerns of superintendents other than just switching the cap to a steady 2 percent. For starters, when the cap was first implemented, the governor’s office promised reforms in unfunded mandates imposed upon school districts—like mandatory teacher training and programs that increase the annual school budget. But the reforms never came.

“The governor set up a panel to look at some of these costs but nothing was ever done with it,” Mr. Russo said. “The position that we have taken is that with the tie-in directly to CPI, it is not realistic because the costs … are significant costs that are being driven by these mandates which we have no control over.”

In Westhampton Beach, Board of Education President Suzanne Mensch agrees that there are changes that should be made to the legislation, adding that her district has sent letters to the state most years since the cap was implemented. One of the biggest concerns, she said, is that the cap does not account for districts that need to pay tuition, a situation that many East End school districts face. Currently, four districts—Remsenburg-Speonk, East Quogue, Quogue and East Moriches—pay to send their students to Westhampton Beach for middle school and high school education, accounting for $21 million last school year, which represents a significant portion of Westhampton Beach’s $55 million operating budget. If sending districts continue to have trouble incorporating their tuition payouts into their own budget plans without piercing the cap—a move that would require 60 percent of voters to approve or risk being reduced to an austerity budget with a zero percent increase—it could leave operating expenses in limbo for larger receiving districts, like Westhampton Beach, Southampton and East Hampton.

“There are issues that arrived from the tax cap for all districts and issues that are particular to our district because of the tuition sending districts and the relationships that we have,” said Ms. Mensch, who would also encourage the cap to take fixed costs, like tuition, into consideration. “The tax cap does not appropriately address that and we have concerns because of our structure.”
East Hampton Board of Education President J.P. Foster agreed, saying that although his district has not submitted any formal letters, he would support changing the cap to 2 percent because of the stability it would offer.

“It is next to impossible to plan your budget in advance without knowing what your levy increase is going to be,” Mr. Foster said this week. “Our superintendent, Richard Burns, did this presentation for us a few years ago saying the 2 percent is not really 2 percent because I don’t know when the last time it was that. It would have helped us if it been [2 percent] but we are not even close right now.”

Such relief, however, does not appear to be coming any time soon, according to State Assemblyman Fred W. Thiele Jr. In fact, the cap was originally set to expire after the 2016-17 budget cycle but was extended last year until the end of the 2019-20 school year.

“I think the 2 percent would certainly provide more predictability for school districts and would still cap taxes while providing more revenue for schools,” Mr. Thiele said. “But ultimately I think that the focus of the legislature is probably going to be on increasing state aid rather than amending the tax cap.”

The cap, Mr. Thiele said, is the biggest feather in Governor Andrew Cuomo’s cap to date and it is unlikely he will support any changes. Regardless, Mr. Thiele said there will likely be several bills introduced this year, as has been the case in past years, to change the laws to exempt certain expenses, like tuition, although it is unclear how much traction those bills will gain.

“He views the cap as one of his signature achievements in office and it continues to be extremely popular with voters,” Mr. Thiele said. “So combine those factors and it is hard for me to believe the governor would change his position at all.”

For now, the districts are kicking off their budget planning for the 2017-18 school year, and the final CPI rate for that budget is expected to be released later this month.

“Publicly it was always put out there as a 2-percent tax cap, that was on TV and in the news and things like that, but when you delve into the fine print we knew it would never really be a true 2 percent and it only took one year for all of the districts to see that,” Ms. Mensch said. “There was never an explicit promise, but I think the public as a whole anticipated it being closer to 2 percent, but it’s not.”

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Not surprising that the education industry wants more money year after year.
By bigfresh (2524), north sea on Jan 11, 17 11:35 AM
I empathize just a little with the school administrators, as they have a tough job not being able to plan out budgets and decide whether the cap will help them meet cost increases which are somewhat out of their control (like health insurance) or whether they will have to cut programs or staff. It's a tough position to be in. However, the real issue, is that our tiny, itsy-bitsy, antiquated school district structures need to change, and this argument about tax caps misses the bigger issue. There ...more
By Rickenbacker (209), Southampton on Jan 11, 17 1:15 PM
Healthcare costs for current employees and pensioned retirees grow at a rate 2 to 3 times the inflation rate. That mismatch drives most of the budget stress. Cut coverage, which will result in the union throwing the newest teachers under the bus and making them pay more for medical coverage or force local government to directly negotiate better terms with the local healthcare network and make this coverage mandatory. Both require tough, financially astute political will power.
By dfree (124), hampton bays on Jan 11, 17 7:59 PM
Healthcare costs for current employees and pensioned retirees grow at a rate 2 to 3 times the inflation rate. That mismatch drives most of the budget stress. Cut coverage, which will result in the union throwing the newest teachers under the bus and making them pay more for medical coverage or force local government to directly negotiate better terms with the local healthcare network and make this coverage mandatory. Both require tough, financially astute political will power.
By dfree (124), hampton bays on Jan 11, 17 7:59 PM
Salaries and benefits for teachers and administrators have been out of control for many years. Retirees and average earning residents are being substantially injured by high school taxes.
Too many highly paid administrative staff, pensions in excess of $100,000 , lifetime health and dental insurance for retired teachers & their families are no longer acceptable.
By patriot50 (21), sag harbor on Jan 12, 17 6:23 PM
Sorry to say but our employees have to absorb the increased cost of health insurance . The taxpayer can no longer be expected to pay more . We can not afford it.
By bigfresh (2524), north sea on Jan 15, 17 11:46 AM
Childcare Center of the Hamptons, March Open House