New Paltz school budget will be affected by contracting economy

New Paltz school officials have a tough problem with the budget this year: even maintaining exactly the same amount of spending would require convincing three out of every five voters to say “yes,” because the tax cap is tightening by more than half a million dollars due to a contracting economy.

Sharifa Carbon, the assistant superintendent for business, laid out how Governor Cuomo’s strategies and proposed budget are putting education in a bind: a growing amount of school funding is being shifted to local property taxation, but the tax cap means that 60% of voters need to support anything that exceeds what that complicated formula spits out. Among the governor’s gimmicks has been to keep federal stimulus money in Albany by reducing state aid by the same amount. Once that stimulus money dries up, Carbon doesn’t think it’s likely that the state aid which was cut on the sly would then be restored. School officials around the state have been breathing a sigh of relief that a 20% cut to foundation aid—the primary form of state aid for schools—was not imposed, but there is no expectation of state aid actually being increased instead.

There is an increase of $1.6 million in what’s coming to New Paltz in the form of reimbursements. That’s the scheme that is used to provide aid for spending in a number of categories, including on capital projects and BOCES contracts: the money is spent one year, and reimbursed the next. Cuomo’s executive budget includes a proposal that legislators have rejected in the past, one that would lump all these categories together and put a cap on them as a whole. Carbon expects that if the idea ever does get passed, it will result in less aid coming in and more of the burden being put on local property owners instead. The governor’s presentation to administrators around was “convoluted,” Carbon said, and not particularly revealing of the full consequences if legislators pass the proposal into law.

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Carbon also filled in some of the details about how an individual district’s tax cap is calculated: it begins with the current tax levy, which is then multiplied by a factor that represents the property growth in the district, as well as the consumer price index. Payments in lieu of taxes are factored in to a lesser extent, and theoretically there are exclusions based on capital and retirement expenses. However, Carbon said, those exclusions only kick in once they reach a certain threshold, and that’s something the administrator has never seen happen since the tax cap was first passed ten years ago.

The current budget had an increase of 2.2%, lower than the 2.84% possible within the cap; according to Carbon, that effort to be frugal during the pandemic is the main reason why this year’s cap shrinks what’s possible by 1.23%, or nearly $560,000.

Creating a budget that’s within a shrinking cap is a challenge for this year, but Carbon warned that this is by no means an issue that’s going away. That’s because student enrollment had been falling for some time even before the pandemic, and that’s a trend which is expected to continue.

A tactic that can be used to soften the blow of a tough budget is to dip into the fund balance, but that has risks of its own. The fund balance is the tax money left over at the end of the school year, after all the bills are paid. In one sense, it’s money collected from taxpayers that wasn’t actually needed; however, it’s also what’s used to cover expenses that crop up unexpectedly. State law limits school district fund balances to four percent as a way to discourage too much tax being collected, and one way it’s kept down is by using it to reduce the size of the tax levy for the next year. This time, using the fund balance is expected to reduce the size of the budget reductions by half, to about $1.5 million. Most trustees expressed appreciation for the long-term peril the district may be in, and wish to keep that in mind when considering how heavily to tap the fund balance; Teresa Thompson did sound a rare note of optimism, predicting that “after two years, I think the sun will shine.”

In order to do a better job explaining all of this, Carbon said, the budget calendar is going to be modified. While the deadline to finalize the budget that will be on the ballot can’t be changed, some of the public sessions are being pushed back. A fuller update will be presented on March 17, and there will be a workshop session during which community members can ask questions on March 24. The official community forum will be held April 7, and trustees will adopt the finalized budget for the ballot on April 21.