With high inflation and declining aid, more districts may be squeezed
Are the Garrison School budget struggles this year and last with the state tax cap a warning sign for other districts?
Yes, especially if inflation doesn’t slow down, according to those who track school finances in New York state, such as the Association of School Business Officials of New York (ASBO of NY) and the New York State Council of School Superintendents.
“Across the board there is concern about the longer-term outlook and how districts manage the effects of inflation,” said Robert Lowry, deputy director of the Council of School Superintendents.
Many districts have been protected for the last two years from the effects of inflation, largely because of an influx of state assistance known as Foundation Aid. Overall, the money sent to districts from Albany increased 7 percent in last year’s budget and 13 percent this year, Lowry said. Short-term federal pandemic relief payments have also acted as a buffer.
But as Foundation Aid levels off and COVID-19 dollars dry up, inflation could wreak havoc for district budgets because of how the state-mandated property tax cap is calculated each year. Since 2012, the formula for school districts has limited the growth of property taxes to the rate of inflation or 2 percent, whichever is less. “Each year’s tax cap decision has long-term consequences, because the previous year’s levy is the starting point in calculating the tax cap,” the ASBO of NY noted in a recent report.
That cap wasn’t a challenge for most districts from 2012 to 2020, when inflation hovered around or well below 2 percent. But problems arose when inflation jumped to 4.7 percent in 2021 and 6.5 percent last year, pushing more districts’ caps below the rate of inflation. Two years ago, 79 percent of districts in the state had tax caps higher than the rate of inflation, according to ASBO of NY. Last year, that fell to 8 percent. In the Hudson Valley only 14 percent of districts had a cap higher than inflation last year, the highest level for the state’s nine regions.
Meanwhile, Foundation Aid is distributed based on need. As a relatively wealthy district, Garrison received an increase of only $34,000 in Foundation Aid between last year and this year. As a result, inflation has challenged the Garrison school budget. This year the district has proposed a 3.3 percent property tax levy increase and is not seeking a tax cap override for its $12.45 million budget. But to make ends meet, the district is having to spend nearly $700,000 in savings and make $220,000 in cuts, including reducing a full-time art teacher to part-time, reassigning Committee on Special Education chair duties to the school psychologist, and dropping a bus and driver from its contract fleet.
Last year, the district was able to override its 2.2 percent cap when more than 60 percent of voters approved a 6.6 percent increase. A request for a 9.18 increase earlier had failed.
Haldane and Beacon, for various reasons, including higher amounts of Foundation Aid, have not yet faced those circumstances. (The state budget for 2023-24, approved this week, includes $719,000 in additional Foundation Aid for Haldane and $621,000 for Beacon, but only $17,200 for Garrison.)
Unless inflation comes down, Garrison officials acknowledge the district may need to seek a tax-cap override during next year’s budget cycle. “The revenues are not covering expenses,” said Carl Albano, the superintendent. “That’s not a good long-term strategy.”
Garrison isn’t the only district having difficulty because of the combination of high inflation and relatively low Foundation Aid. According to the School Board Association, about 250 districts qualified for the minimum amount of state aid, including the Byram Hills district in Westchester County. “We all have similar issues with increases in salaries, health insurance and retirement expenses,” said Jen Lamia, the superintendent.
For those districts that have received more aid, it came just in time to soften the impact of high inflation.
Starting in 2022 and ending with the proposed 2024 budget, the state Legislature began ramping up Foundation Aid to about $24 billion a year. As a result, many needier districts have seen substantial increases. For example, Brewster schools are expected to receive an additional $7.9 million between 2022 and 2024. Haldane is expected to receive $1.1 million more over that time.
Foundation Aid is the money that the state is obligated to pay as the result of a lawsuit brought in 2007 that sought to make sure every district benefited in equal measure. But once the current state budget cycle is over, the foundation aid will likely be deemed fully funded. There will be no more large increases to mask high inflation.
The ASBO and the New York State School Board Association have each called for a revision to the cap formula to allow districts to grow their budgets up to the rate of inflation.
Without such an adjustment, “you’re going to have districts that will feel a squeeze and they’re not going to be willing to go above the cap,” said Brian Cechnicki, executive director of ASBO of NY. As a result, those districts will have to either cut programs or deplete their savings, both of which Garrison is doing.
But a revision to the formula appears unlikely, said Assembly Member Dana Levenberg, a Democrat whose district includes Garrison. “There hasn’t been a public appetite for changing the tax cap,” she said. “People know that school taxes are quite high.”
In the state Senate, the chair of the Education Committee opposes any change. “Our region suffers from extremely high property tax bills, and I’m not in favor of modifying the cap under these circumstances,” said Shelley Mayer, a Democrat from Yonkers.
However, other changes may be coming to Foundation Aid. In February, Betty Rosa, the state education commissioner, called for a study on how to improve the funding formula, which hasn’t changed since 2007. Mayer said she supports spending $1 million on that effort.
One of the weaknesses of the Foundation Aid formula is its reliance on poverty data from the 2000 census, said Brian Fessler, director of governmental relations for the state School Board Association.
That outdated data has impacted the Harrison district in Westchester, which, like Garrison, receives minimal Foundation Aid, said Louis Wool, the superintendent. Wool said that even though his district has many wealthy residents, 24 percent of students live at or below the poverty line. “Extreme wealth can skew how a community appears” in the data, he said.
In Byram Hills, Lamia said that her district, which is located near Armonk, is grouped by the Foundation Aid formula with districts with lower costs of living, unfairly lowering its allocation of aid.
Garrison qualifies for little Foundation Aid largely because it has so few poor or disabled students, said Joseph Jimick, the district’s business administrator. But the hamlet has its own unusual challenges. For example, because of its small size, one or two students who require special education services can consume a larger percentage of the budget. He said Garrison can often transport one child with special needs to an out-of-district program, but the annual cost can reach $200,000.