Democracy works

Tuesday, April 17th, 2012 at 4:14 pm by

Sometimes.  At least in schools.

This weekend, the Journal News published a comprehensive article analyzing school spending and taxing trends since 2003-04 in its readership area, the lower Hudson Valley.

The Journal News notes that average annual spending increases dropped by six percentage points between two four-year periods —  7.6. percent a year between 2003-04 and 2007-08 and 1.6 percent annually over the four years since.

Today, the paper has a follow-up editorial, “School districts learn their lesson,” and ascribes the change chiefly to an influx of more fiscally conservative school board members.

The shift in school spending and taxing occurred statewide.  My own sense, looking at the state as a whole, is that the change happened because superintendents and board members – veteran as well as new – recognized it had to:  following the “Great Recession,” taxpayers either could not or would not support a continuation of increases that had been common.

One of the local taxpayer leaders quoted by the Journal News makes a similar point, “The change shows that school boards and administrators have heard from taxpayers, the people who pay for the schools, that the spending couldn’t continue.”

Here is a chart I have used in many presentations, showing changes in school spending, tax levy, and state aid between 2003-04 and 2011-12.

The chart reveals that school tax increases were slowing even before the recession first affected school budget adoption decisions, in 2009-10.  With state aid increases growing and pension costs moderating, districts slowed the rate of increase in local taxes.

But it is most striking to contrast the last two years with 2003-04.  In all three years districts absorbed reductions in state aid and steep increases in pension costs.

In 2003, districts proposed budgets with tax increases averaging 8.2 percent, while in each of the last two years, the increases have averaged roughly five points lower – 3.2 percent in 2010-11 and 3.4 percent in 2011-12.

Districts absorbed larger state aid cuts with smaller tax increases than in 2003-04 partly through greater spending restraint.  In the last two years, statewide school spending increases averaged under 1.5 percent.

Our estimate is that pension cost increases alone roughly matched the overall spending growth.  Add in health insurance cost  increases and the conclusion emerges that schools must have cut all other spending on balance in order to  absorb growth in those benefit costs while holding down their overall spending and tax increases.

The Journal News article includes expressions from local leaders of special concern for the plight of poorer districts.  The concern is warranted.  This past year, for example, the poorest 20 percent of school districts (measured by property wealth), held their total spending flat, while absorbing pension and health care increases proportionately similar to those of their better-off peers.

The article concludes,

Districts that learned quickly to run on the cheap, at least compared with before the recession, now say things are out of their hands. Officials insist they need the state to kill some of its many expensive mandates, which account for 15 percent to 20 percent of districts’ overall budgets.

The Journal News suggests that the change in approach to school budgeting is more or less permanent.

Our sense is that the turn-around in state finances this year has not translated into upswing in outlook for local leaders engaged in school budget decision-making.

The enacted state budget provides the first increase in state aid after three years of cuts and freezes.  But it is offset in many districts by the loss of federal Education Jobs Funds.

Also, while a district may take in more state aid, they are likely to ask for even smaller tax increases than those favorably cited by the Journal News.  With the new tax cap, proposed local tax increases appear likely to average about one percentage point below those presented by districts a year ago.

Finally, as many local leaders quoted in the article explain, after three tough years, easier budget reduction options have been exhausted.

School district leaders responded to voter concerns over property taxes.  In a month we will see how voters respond to the choices presented to them for 2012-13 school budgets, and eventually, to the consequences of the choices for their schools.

This entry was posted on Tuesday, April 17th, 2012 at 4:14 pm and is filed under Finance, State Budget. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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