Shift Education Funding To Income Tax Says Assemblyman at Galef-Sponsored Forum

L-R: Assemblyman Kevin Cahill. Assemblywoman Sandy Galef, Frank Mauro, Martin Reid, E.J. McMahon

Proposal draws supporters and critics

By Kevin Foley

Is the way New York State funds its public primary and secondary school education system the best we can do?   As the governor and N.Y. State Legislature grapple with a $10 billion budget shortfall and local school districts confront the public’s displeasure with rising property taxes as the largest revenue source, some are suggesting there is another way. State Assemblyman Kevin Cahill, (D-Kingston) came to the Desmond-Fish Library in Garrison last Thursday, Feb. 10, to promote his “Equity in Education” legislation to have the state government assume the lion’s share of education funding through an increase in the state income tax.  The bill would phase out school property taxes over a five-year period. Cahill appeared at the invitation of his colleague Assemblywoman Sandy Galef, a Democrat whose district includes Philipstown.  Galef set up a challenge for Cahill by also inviting a three-member panel of policy experts to respond to Cahill’s legislation.
       The meeting attracted over 75 people with their cars exceeding the library’s limited snow-bound parking area, resulting in gridlock with many people eventually just shutting off their engines wherever their cars stood.  The full meeting room would have been standing-room-only had not some people driven away upon seeing the traffic snafu. Galef opened the lively, well-mannered discussion declaring herself agnostic on Cahill’s proposal but definitely interested in exploring new ideas as she referred to the budget gap and the governor’s proposals for a 2-percent property tax cap and a cut in state aid to education.  “Many people have come to me suggesting that income tax is a more progressive form of taxation, and would be a fairer way to fund schools, taxing those with steady and rising incomes, versus others who may have fixed assets as well as fixed incomes.  I’ve heard from other people who believe that because income is more volatile than property, in tough times when many people are out of work—like we are seeing now—schools would suffer if they had to count on income tax as their main funding stream,” said Galef.
       Cahill began by emphasizing his legislation as written “was not a panacea” and that he looked forward to others helping him to improve it. He said under his bill the state would create guidelines for the definition of “a basic quality education” for all school boards to follow with the state picking up the estimated over $20 billion cost through an increase in income tax rates for individuals and businesses.  Cahill acknowledged the numbers sounded daunting given current budget problems. “I don’t believe it is impossible,” he said.  “It’s the right way to go.” Using the example of an elderly Kingston constituent who lives in her historic home with $8,000 in property taxes and $15,000 of fixed income, Cahill said that “it is not acceptable that we dispossess people from their homes with increases in property taxes.”  He said he wasn’t sure how he would vote on Gov. Andrew Cuomo’s proposed 2-percent cap on property taxes but added that “just putting a cap on what is unacceptable is not acceptable.”
       Cahill pointed out that the schools’ large consumption of property taxes placed stress on other local services that also use property taxes as a revenue source, causing community tensions.  He also said under his bill districts that wanted to still use property taxes to enhance their education programs could do so but would need an approval of three-quarters of the district’s voters.
       Cahill expressed dismay over the recent history of education funding with the state government’s share declining rather than following former Gov. Eliot Spitzer’s commitment to increase it in the wake of a court decision that found the system of funding unfair, especially to poorer districts. Currently the state funds about 41 percent of education spending with property taxes supplying 45 percent and other sources, such as the federal government and the lottery, making up the difference. Anticipating arguments over increased income taxation, Cahill emphasized that in the 1970s the top income tax rate for the wealthiest New Yorkers was 16.5 percent. “And now we are debating 8.5 percent,” he said. In promoting his legislation, Cahill said he was representing not only his own district but also all the children of the state.  “It should not be that a child’s education depends on where they are born,” he said, drawing applause from an audience containing several supporters of his ideas.
       One panelist, E. J. McMahon, senior fellow for tax and budgetary studies at the Manhattan Institute, took sharp issue with Cahill’s income tax idea.  Paraphrasing Winston Churchill on democracy, McMahon said: “Property taxes were the worst way to raise revenue except for all the others.”  He described personal income tax as a volatile tax compared to the relative stability of property tax revenue. He tied the state’s current fiscal crisis to the ups and downs of income tax revenue, adding that California’s even worse budget problems resulted directly from an education-funding shift to the state government. McMahon said the introduction of a big increase in income tax rates for education would fall disproportionately on wealthy New York City residents.  He said currently 61 percent of state income tax revenue came from people making over $200,000 a year and suggested these taxpayers wouldn’t take kindly to the shift in the education burden.  He added later that there were many New Jersey commuters, who pay high property taxes at home and also pay income taxes in New York.  “Do you think they or their employers are not going to notice a large increase?”
       For McMahon, the education funding problem isn’t the revenue source so much as New York’s education spending, which he described as well above the national average.  He said New York was No. 1 nationally in spending with its overall $17,000 per pupil, 67 percent above the national average, with the $12,000 instructional portion being 90 percent above the national average. “The main driver of costs is professional staff salaries and staffing levels,” said McMahon.  “Consolidation of school districts would save some money but the staffing is way above U.S. norms; that’s the problem.” Pointing to Cahill’s own Assembly district, McMahon observed that several Ulster County school districts were in the highest percentiles of spending. “We have a lot of school districts that are BMWs, but the people only want to pay for a Honda,” he said.
       While acknowledging the complexity involved in changing the state’s funding formula, another panelist, long-time Albany budget guru Frank Mauro, came down in favor of Cahill’s approach as the way to create a broader-based education tax, reduce the reliance on property taxes, and begin to close the gaps among school districts, with the establishment of a universal education standard. Mauro, executive director of the Fiscal Policy Institute, said the state was not following a previously agreed-upon formula for funding aid to support “a sound basic education.”  He said Gov. Cuomo was only proposing a 2008-9 funding level this year, which would hurt poorer districts more.  He urged the state legislature not to approve a property tax cap or the removal of the commitment to a basic education without changing the system along the lines Cahill proposed. While not denying New York spending was high on average, Mauro cautioned McMahon that his per-pupil spending statistics were based on pupil attendance rather than enrollment and looked worse because of New York City’s lower attendance numbers.
       The third panelist, Martin Reid, deputy director of government relations for the N.Y. State School Boards Association, warned that income tax was not sufficiently predictable and was vulnerable to legislative politics in any given budget year. He stressed the importance of maintaining local input when school boards have to craft a budget for a public vote.  He said that districts with a prevalence of second homes would be decimated by a change away from the property tax and that the provision allowing a three-quarters popular vote to use property taxes to increase funding would only continue the education inequities among school districts. Responding to earlier comments about the number of school districts serving small numbers of students, Reid pointed out “consolidation almost always fails when put to a vote.”  Reid emphasized, “School boards are looking for greater flexibility to run schools effectively on their own.” 
       Galef provided an opportunity for the audience to ask questions of the panel but the dozen people who lined up for the microphone mostly made statements of their own, either adding nuance to the panelists’ positions or broadening the discussion to related issues. School superintendents’ salaries, the shrinking pool of administrative candidates, the definition of a quality education, the anger expressed at school board meetings, and inadequate preparations for college were among the issues discussed. Local resident Ming Wang said she would leave the funding decisions to the experts but urged policymakers “to consider the human element of education funding, such as keeping seniors in their homes and the growing hostility in communities to young families.” The evening ended with a library staff member reminding participants the staff had been waiting patiently for the audience to move their cars so the staff could go home.

One thought on “Shift Education Funding To Income Tax Says Assemblyman at Galef-Sponsored Forum

  1. I tried to attend the forum but wasn’t able to get into the parking lot. A few questions I had for Mr Cahill which you can’t seem to find in any of the PR/legislation materials: 1) what is the projected tax rate you would need to replace the property tax on individuals? 2) how are you defining a ” basic education”? and 3) you would reasonably have to assume a certain % of people will creatively shelter taxable income if the rates were high enough & a certain % will also leave the state under the same assumption. What % ‘s are you using in your financial model? It does happen

    One problem I’ve seen repeatedly in public policy as it relates to education is a lack of specifics & financial impact as a result of legislation. It seems the details in many instances are an afterthought. This may be a great idea, be specific .