Capping the Right Bottle: Cost Containment for Schools

Transcription

1 Capping the Right Bottle: Cost Containment for Schools Presented by Elizabeth Lynam of the Citizens Budget Commission for the NYSSBA Conference March 3, 2008

2 Overview Local taxes are the highest in the nation School districts comprise the majority of the burden School spending is high School spending driven by The State s role Efforts/options for lowering the burden 2

3 Highest Local Taxes State and Local Taxes per $1,000 of Personal Income New York and Selected Competitor States Fiscal Year Combined State and Local Taxes State Taxes Local Taxes Per $1,000 Personal Income Percent of U.S. Average Rank Per $1,000 Personal Income Percent of U.S. Average Rank Per $1,000 Personal Income Percent of U.S. Average Rank New York $ % 2 $68 101% 30 $82 179% 1 Connecticut % % % 16 Ohio % % % 8 New Jersey % % % 3 California % % % 33 Pennsylvania % % % 18 Illinios % % % 6 Michigan % % % 35 North Carolina % % % 36 Massachusetts % % % 30 Florida % % % 17 Georgia % % % 22 Texas % % % 4 U.S. Average $ % NAP $67 100% NAP $46 100% NAP Note: Calculated as fiscal year taxes divided by prior year personal income. Does not include the District of Columbia. Competitor states are the 10 most populous states plus Connecticut, New Jersey and Massachusetts. NAP = Not Applicable. Sources: U.S. Census Bureau, State and Local Government Finances: ; U.S. Department of Commerce, Bureau of Economic Analysis. 3

4 Even without New York City, New York s local tax burden is 32 percent higher the next highest state. New York City s local tax burden is $94 per $1,000 personal income more than double the national average. The local tax burden outside the City is $72 per $1,000 personal income 58 percent above average. 4

5 Property Taxes Play a Big Role The only states with higher property tax burdens than New York are New Hampshire, Maine, Vermont, New Jersey, Wyoming and Rhode Island. Property Taxes per $1,000 of Personal Income New York and Selected Competitor States Fiscal Year Amount Percent of U.S. Average National Rank (1 = Highest) New York State $46 134% 7 New York City $36 104% NAP Outside New York City $54 157% NAP New Jersey % 4 Connecticut % 8 Texas % 10 Illinios % 11 Michigan % 13 Massachusetts % 16 Florida % 20 Ohio 34 98% 21 Pennsylvania 32 94% 24 Georgia 31 90% 28 California 27 78% 38 North Carolina 26 74% 39 U.S. Average $35 100% NAP Note: Calculated as fiscal year taxes divided by prior year personal income. Does not include District of Columbia. Competitor states are the 10 most populous states plus Connecticut, New Jersey and Massachusetts. NAP=Not Applicable. Sources: U.S. Census Bureau, State and Local Government Finances: ; U.S. Department of Commerce, Bureau of Economic Analysis. 5

6 Property tax rates are 45 percent higher upstate than downstate (outside NYC). Property values in downstate counties increased 5 times faster than in the upstate counties from 1995 to Upstate counties increased property taxes only 28 percent from 1995 to 2005, yet have been unable to lower property tax rates. Full Value (Effective) Property Tax Rate Fiscal Years 1995, 2000 and 2005 Per $1,000 Value $35 $30 $25 $20 $15 $10 $29 $28 $25 $28 $30 $27 $28 $26 $21 $30 $30 $31 $5 $0 New York State New York City NYC Suburbs All Other Upstate Counties FY 1995 FY 2000 FY 2005 Note: NYC Suburbs are Dutchess, Nassau, Putnam, Rockland, Orange, Suffolk, Ulster and Westchester Counties. 6

7 State Leaders Have Tried to Address the Local Tax Burden. School Tax Relief (STAR) Property Tax Rebates Medicaid Cap Foundation Aid for Schools Government Consolidation 7

8 STAR would provide greater relief to less wealthy districts if allocated as state education aid $517 $715 $348 $1,436 $312 $1,373 $1,334 $290 $949 $827 $833 $766 $669 Figure 5 STAR Per Pupil School Year $1,151 STAR per Pupil STAR per Pupil if Allocated As State Aid $857$904 $930 $732 $692 $603 $627 $636 $565 $256 $332 $1,365 $1,145 $942 New York City Buffalo Rochester Syracuse Yonkers Binghamton Utica Albany Massena Saratoga Springs Great Neck Scarsdale Roosevelt Mount Vernon Source: New York State Department of Education, Office of Management Services, Fiscal Analysis and Research Unit, School District Fiscal Profiles, Masterfile for

9 Property tax rebates are better targeted but embody same equity flaws as STAR. Limiting the Middle-Class rebate to households with less than $250,000 is positive first step. But, rebate provides greater relief to districts in wealthier counties. Maximum rebate varies from $250 in Buffalo to $809 in Scarsdale. 9

10 School District Levy is Major 10

11 School Spending in NYS High 11

12 School Districts Rely More on Property Taxes 12

13 Leading to A Pattern of Inequitable School Finance Fiscal Characteristics of Selected School Districts School Year Local Tax Local School Tax Effort Local Revenue Total Revenue District Pupils Base per Pupil (per $1,000 Tax Base) per Pupil per Pupil New York City 1,043,816 $603,564 $12.03 $7,259 $15,025 "Big 4" Cities Buffalo 43, , ,219 14,871 Rochester 36, , ,112 15,356 Syracuse 22, , ,081 15,028 Yonkers 24, , ,980 18,203 Other Upstate Urban Binghamton 6, , ,243 12,469 Utica 9, , ,319 12,010 Albany 10, , ,093 16,994 Upstate Rural Massena 2, , ,023 12,970 Upstate Suburban Saratoga Springs 6, , ,658 13,319 Wealthy Downstate Suburban Great Neck 6,262 2,395, ,786 23,489 Scarsdale 4,714 2,394, ,460 21,688 Poor Downstate Suburban Roosevelt 3, , ,373 17,932 Mount Vernon 9, , ,693 15,860 New York State 2,848,242 $645,404 $11.79 $7,608 $15,118 Note: Tax Base is an equally weighted average of personal income and real property values. Source: New York State Department of Education, Office of Management Services, Fiscal Analysis and Research Unit, School District Fiscal Profiles, Masterfile for

14 Components of $17B Increase 14

15 Drivers of School Spending Growth Change in CPI= 30 % 15

16 Getting the Cap on One Bottle School aid reform- continued commitment Wick s law Labor law changes Triborough PERB Pension reform Mandate reform- special ed Other areas of mischief- retiree health insurance 16

17 More practical thoughts? State takeover of pension costs- those that regulate a system should pay for it? Buy-in for local districts for the State health insurance program, NYSHIP? Stop State action on the retiree health insurance protections Circuit break- tax burden cap Little/Galef Reprogram STAR/Halt new rebates 17

18 Why Cap the Other Bottle? To create pressure on State leaders to reform cost drivers 18

19 Why Choose? The Mandate of the Commission- Executive Order #22 The mandate to the Commission to examine: the root causes of NY s high property tax burden, including the expenditures of local governments and school districts, unfunded mandates imposed by the State, and other factors driving the growth of local property tax levies; the impact of increased State financial support and taxpayer relief and rebate programs on local school district budgets and tax levies; the extent of public involvement in the development and approval of school and other local government budgets; 19

20 Why Choose? The Mandate of the Commission the effectiveness of the various state mechanisms to provide property tax relief to different classes of taxpayers; the effectiveness of property tax caps as a mechanism to control growth in school district tax levies, the experience of other states in implementing such caps, and the potential impact of such caps on educational achievement; and the most effective approach to imposing a limit on local school property tax growth in NYS without adversely impacting the ability of school districts to provide a quality education to all students. 20

21 Commission Timing Final Report Due December 1, 2008 Interim Report Due May 15 setting forth the Commission s recommendations with respect to a statutory property tax cap Public Hearings Schedule to date: Wednesday, March 5, Long Island and Westchester Thursday, March 20, Rochester Wednesday, April 2, Buffalo Thursday, April 10, Syracuse Wednesday, April 23, Albany 21

22 The End Game: Both Bottles We need constituencies that will begin to rival the strength of special interests in Albany Consider support the broader mandate to the PTR Commission 22